GBP/USD Steady Near 1.3500 as Ceasefire Hopes Offset Fed and UK Inflation Risks

The British pound is maintaining its position against the US dollar around the 1.3500 level, with emerging prospects for a ceasefire in the Ukraine-Russia conflict helping to counterbalance potential pressures from Federal Reserve policies and upcoming UK inflation data. Traders are also keeping a close eye on the release of the Fed’s July meeting minutes and the central bank chair’s upcoming speech at an economic symposium.

Geopolitical advancements are lifting market spirits, enabling the pound to rebound from early setbacks. A recent meeting between US and Russian leaders set the stage for further discussions involving Washington, European officials, and Ukraine’s president. Fresh reports suggest a proposal for direct talks between US and Ukrainian leaders in Moscow, fostering optimism for conflict resolution.

In terms of US monetary policy, a Federal Reserve governor affirmed unchanged expectations for three rate cuts in 2025, highlighting a stronger emphasis on employment goals as inflation eases. This comes ahead of the much-anticipated symposium speech, which may offer insights into future Fed actions.
US economic indicators showed varied results: July housing starts rose impressively by 5.2% to 1.428 million units, beating expectations of a decline to 1.29 million. In contrast, building permits decreased from 1.386 million to 1.354 million, indicating some hesitancy in the sector.

In the UK, focus is intensifying on July’s inflation numbers. The consumer price index is anticipated to hit 3.7%, with services inflation expected at 4.8%. Elevated services prices might hinder the Bank of England’s ability to pursue further rate reductions. A recent economist survey projects the benchmark rate ending 2025 at 3.75%, suggesting only one more 25-basis-point cut by year-end.

Technically, the GBP/USD pair’s ascent has paused but is bolstered by the 50-day simple moving average at 1.3497. The relative strength index stays bullish yet flat, pointing to potential consolidation. Surpassing the August 18 peak of 1.3565 could target 1.3600. A fall below 1.3500 would test the 50-day average, then the 20-day at 1.3416, and 1.3400 thereafter.