Sterling climbed to a two-week high against the US dollar this week, with GBP/USD reaching the 1.3350 level before pressing toward the psychologically significant 1.3400 barrier. The move was driven by weaker-than-expected US labour market data that softened the dollar broadly, giving Cable room to recover from its recent consolidation range. The rally, however, ran into firm resistance at 1.3400, a level that has repeatedly capped upside attempts in recent sessions. According to London Hub Global analysts, the pair now sits at a critical technical and fundamental crossroads, with two major central bank decisions approaching before the end of July.
The immediate catalyst for sterling’s advance was a softer US jobs print that reinforced market expectations of Federal Reserve rate cuts later this year. Non-farm payrolls and related labour indicators have been showing signs of gradual cooling, reducing the urgency for the Fed to maintain its restrictive policy stance. When US employment data disappoints relative to consensus, the dollar typically weakens across the board, and this week’s release followed that pattern precisely. The dollar index retreated, and GBP/USD benefited alongside other major pairs.
The 1.3400 level carries weight beyond simple chart mechanics. It represents a zone where sellers have consistently re-entered the market, reflecting a broader uncertainty about whether sterling’s medium-term fundamentals justify a sustained break higher. Cable has not closed convincingly above 1.3400 in recent weeks, and each approach has been met with selling pressure that points to genuine disagreement among market participants about the pair’s fair value at current levels.
From a technical perspective, a clean daily close above 1.3400 would open the path toward 1.3450 and potentially 1.3500, levels last tested during the sterling recovery earlier this year. Failure to break higher, particularly if upcoming central bank communications disappoint sterling bulls, could see the pair retreat toward the 1.3250 to 1.3280 support zone. London Hub Global analysts see this as a defining range for Cable through the remainder of July, with directional conviction likely to emerge only after the Federal Reserve and Bank of England policy meetings.
The Federal Reserve is expected to hold rates steady at its late July meeting, but the tone of Chair Jerome Powell’s press conference will be scrutinised for any shift in the timeline for cuts. Markets are currently pricing in two Fed rate reductions before the end of 2025, and any language that pushes back against that expectation would likely strengthen the dollar and pressure GBP/USD lower. Conversely, a dovish lean from the Fed would reinforce the current sterling rally and give buyers the confidence to test 1.3400 again with greater force.
The Bank of England’s position adds a separate layer of complexity. UK inflation has proven stickier than the BoE initially projected, with services inflation in particular remaining elevated and complicating the Monetary Policy Committee’s path toward easing. The BoE has already begun cutting rates from their post-pandemic peak, but the pace of further reductions remains contested within the committee. A more cautious BoE relative to the Fed would be structurally supportive for sterling, as the interest rate differential would shift in the pound’s favour. We at London Hub Global note that this dynamic has been one of the key factors underpinning Cable’s resilience above 1.3200 through much of the second quarter.
UK inflation data released ahead of the BoE meeting will carry significant weight. If consumer price pressures remain above target and services components stay firm, the MPC may signal a slower easing path, which would support sterling. If inflation softens more than expected, the BoE could lean toward additional cuts, narrowing the rate differential and removing one of sterling’s key supports.
For the City of London and UK financial markets more broadly, the GBP/USD trajectory has direct implications. A stronger pound reduces the translated earnings of FTSE 100 companies with significant overseas revenues, a factor that has historically created a negative correlation between sterling strength and the index’s performance. The FTSE 100 is heavily weighted toward multinationals in energy, mining and consumer staples, all of which report in sterling but earn in dollars and other currencies. A sustained move above 1.3400 in Cable could therefore create headwinds for the index even as it reflects improving confidence in the UK economy.
London’s business environment is also sensitive to the interest rate outlook on both sides of the Atlantic. UK interest rates affect borrowing costs for businesses, mortgage holders and commercial property investors across the capital. Any signal from the BoE that rates will remain higher for longer would maintain pressure on London’s property market and corporate financing conditions, while a faster easing cycle would provide relief to rate-sensitive sectors. The London economy, which is disproportionately exposed to financial services, professional services and real estate, watches BoE communications with particular attention.
In our view at London Hub Global, the GBP/USD setup into late July reflects a market that is carefully positioned rather than directionally committed. The soft US jobs data provided a legitimate fundamental reason for the sterling rally, but the stall at 1.3400 suggests that traders are unwilling to extend positions ahead of two central bank meetings that could materially shift the rate differential narrative. The pair is likely to remain range-bound between 1.3250 and 1.3400 until those decisions provide clearer guidance. A break above 1.3400 backed by a dovish Fed and a relatively hawkish BoE would represent the most constructive scenario for Cable, while the reverse combination carries the risk of a return toward 1.3200 and below.
