Last Updated on 19/08/2026
GBP Falls Below 1.3550 Ahead of UK CPI Data
The GBP/USD pair edges lower to around 1.3535 during Wednesday’s early Asian session, with the British Pound coming under pressure after weaker-than-expected UK labor market figures. Market participants are now turning their attention to the UK’s Consumer Price Index (CPI) report, due later in the day, for fresh clues on the inflation outlook and the Bank of England’s policy path.
Technical Analysis
On the daily timeframe, GBP/USD continues to exhibit a constructive bullish outlook, trading above both the 100-day Simple Moving Average (SMA) and the Bollinger Bands’ 20-day midpoint, reinforcing the strength of the prevailing uptrend. The 14-day Relative Strength Index (RSI) stands at 60.8, remaining in positive territory without reaching overbought levels, indicating that upside momentum could persist in the near term.
From a technical perspective, the pair faces immediate resistance near the upper Bollinger Band at 1.3615, a level that may limit further advances. On the downside, initial support is located around the Bollinger middle band at 1.3450, followed by the 100-day SMA at 1.3420. Additional support is seen near the lower Bollinger Band at 1.3285. Holding above this key support cluster would keep the broader bullish structure intact and favor buying on pullbacks rather than signaling a trend reversal.
Fundamental Analysis
UK labour market data released by the Office for National Statistics showed that the unemployment rate held at 4.9% in the three months to June, slightly above the 4.8% market forecast. Meanwhile, average earnings including bonuses slowed to 4.1% from 4.4% previously, pointing to easing wage pressures and potentially reducing the likelihood of a Bank of England (BoE) rate hike later this year.
Markets currently price in one BoE rate increase by year-end, which would take the benchmark rate from 3.75% to 4.0%. ING economist James Smith noted that persistent weakness in private-sector hiring and wage growth means the threshold for a 2026 rate hike remains relatively high unless energy prices experience a severe and sustained surge.
Meanwhile, expectations for a September Federal Reserve rate hike have also declined, offering some support to GBP/USD by limiting further US Dollar gains. Markets now see around a 35% probability of a Fed rate hike in September, down from 47% a month earlier, according to the CME FedWatch Tool.
Scotiabank strategists noted that Sterling has weakened only modestly, broadly tracking declines among its major European peers. Although the latest UK employment figures were disappointing, the data has so far failed to create a significant downside divergence for the Pound.
EUR/USD Strengthens Above 1.1550 as Bullish Outlook Holds
The EUR/USD pair extends gains to trade near 1.1585 during early European hours on Wednesday. The Euro strengthens against the US Dollar after Germany’s ZEW Economic Sentiment survey exceeded market expectations. Investors now await a speech from European Central Bank (ECB) President Christine Lagarde later in the day for fresh clues on the ECB’s monetary policy outlook.
Technical Analysis
On the daily chart, EUR/USD maintains a bullish near-term outlook, with the pair trading above the 100-day moving average (MA) and the Bollinger middle band. This technical setup points to a positive underlying trend following the rebound from support near the lower Bollinger band at 1.1364. The 14-day Relative Strength Index (RSI) stands at 63.8, indicating that buyers remain in control while momentum is approaching overbought levels without reaching them decisively.
On the upside, the August 17 high at 1.1614 represents the first key resistance level. A sustained move above this area could expose the Bollinger upper band near 1.1650, where the pair may encounter stronger selling pressure.
On the downside, initial support lies at the 100-day MA around 1.1570, followed by the Bollinger middle band at 1.1505. If selling pressure intensifies, EUR/USD could retreat toward the lower Bollinger band near 1.1365, with this level remaining important for maintaining the broader bullish trend.
Fundamental Analysis
Data released Tuesday showed that Germany’s ZEW Economic Sentiment Index rose to 34.2 in August from 26.3 previously, beating market expectations of 30.0. The ZEW Current Situation Index also improved significantly to -61.1 from -77.6 in July, coming in above the forecast of -68.8 and providing additional support for the Euro.
Markets are increasingly pricing in further ECB rate hikes. According to the ECB Watch Tool, traders see a 90%–94% probability of a 25-basis-point rate increase to 2.50% at the ECB’s next policy meeting on September 9.
US Dollar remains supported despite weaker Fed hike expectations
MUFG analysts noted that the recent shift in US Dollar sentiment, following last week’s economic data that reduced expectations for further Fed rate hikes, has not resulted in significant unwinding of long-Dollar positions. The US Dollar Index (DXY) continues to hold above its 200-day moving average at 99.185, suggesting that the softer Fed policy outlook has yet to trigger a major Dollar sell-off.
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