GBP/USD Forecast: Cable at Crucial 1.3500 Handle as Inflation Data Looms

[Ben Graham]

GBPUSD is holding around the 1.3500 handle ahead of key UK inflation data due out tomorrow. Cable has traded in a 50-pip range today, between lows around the 1.3480 handle and a daily high thus far of around 1.3530.

The British Pound may well be gaining support ahead of the UK CPI release tomorrow where many are expecting an uptick in inflation.

UK CPI to Come in Hot?

Traders are keeping an eye on UK inflation data coming out tomorrow. Even though household energy bills have dropped, July's inflation (CPI) is expected to rise slightly due to higher food prices. Service inflation might also increase a bit, partly because hotel prices went up temporarily during Oasis concerts. This makes the inflation figure harder to predict, and the Bank of England is likely to view it cautiously.

Experts expect it to rise to 3.7% YoY, marking the third month in a row of increasing inflation. However, if inflation rises more than expected, it could lead to hawkish repricing of a potential rate cut in November which could provide sterling with a boost and see GBP/USD rise even further.

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FOMC Minutes and Jackson Hole to Drive the US Dollar

Looking at the US Dollar, a brief rally yesterday has stalled and leaves the US Dollar index vulnerable to further downside.

The FOMC meeting tomorrow is unlikely to have a massive impact on the US dollar but might give more insights into Federal Reserve policymakers thoughts heading toward the September meeting.

Treasury Secretary Scott Bessent suggested the Fed might cut rates by 0.5% at the next meeting. However, strong consumer spending and higher inflation pressures make most Federal Reserve members hesitant to support such a big move in September without solid evidence.

Markets will wait to hear more from Jerome Powell at Jackson Hole this coming weekend. Powell has a tough decision ahead. Financial markets are fully expecting a rate cut in September. Will he challenge that expectation?

The Fed prefers to stay flexible, especially with another jobs and an inflation report coming soon. But signaling flexibility now would mean guessing the data, which Powell likely wants to avoid. Plus, even if he wanted to, it might be hard to change the market's belief in a September cut.

The bigger debate among investors seems to be about what happens after September.

For now though, the fundamentals do support further GBP strength. A catalyst may be needed to kick the pair back into gear and time will tell if this week will deliver such an event.

Technical Analysis - GBP/USD

GBP/USD failed to break the swing high at 1.3584 during its v-shaped recovery from August 1 lows.

Since then though the pair has edged its way lower toward the 1.3500 handle.

At present the pair is looking like it may finally break below the psychological level but faces significant support to the downside not to mention the fundamental factors in play as well.

The period 14-RSI is approaching the 50 level with a break or bounce of the neutral level signalling momentum and could lead to more volatility and clarity moving forward.

For now the choppiness is likely to continue heading into the inflation print tomorrow. The question is will the inflation release lead to a sustained move in either direction?

Immediate support rests at the 1.3378 handle before the 1.32500 handle comes into focus.

A move higher from here faces resistance at 1.3584 before the 1.3680 and 1.3788 handles become areas of interest.

GBP/USD Daily Chart, August 14, 2025

Source:TradingView.com

Client Sentiment Data - Mixed

Looking at OANDA client sentiment data and market participants are Short on GBP/USD with 52% of traders net-short. I prefer to take a contrarian view toward crowd sentiment, however the figure shows the indecision currently in Cable. Hopefully the data this week can provide a shot in the arm for the pair.

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