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20.08.2026 04:10 AM
The GBP/USD currency pair posted a notable increase on Wednesday, and volatility finally rose. However, the UK's inflation report had nothing to do with this. Let's once again draw traders' attention to such an important (in our view) indicator as volatility. In recent weeks, daily volatility has only exceeded 57 pips twice. This indicates that market activity is currently low. And since it is low, even important reports and events cannot, by definition, provoke movements of 100 pips. Yesterday, we saw the British currency rise by 100 pips almost out of nowhere. Nevertheless, such movement should not surprise anyone. We constantly state that the euro and pound should continue to rise even without local support.
However, there were no important reports this week. To be more precise, unemployment and inflation levels are important releases, but the values reported this week are not significant. Therefore, we cannot ultimately regard these reports as important. The unemployment rate for June did not match analysts' forecasts, instead remaining unchanged at 4.9%. Additionally, not all experts and traders anticipated a decrease in this indicator. Thus, the market reaction to this report was virtually nonexistent. The inflation report also lacked any unexpected figures. The market expected inflation to accelerate to 2.9-3.0%, and the actual figure was 2.9%. Core inflation was expected at 2.5%, but it actually came in at 2.6%, matching the previous figure. In both cases, while the actual figures might seem to differ from forecasts, they coincided with previous values, indicating no change.
As a result, there was virtually no reaction to the inflation report, the most important of the week. On Friday, the indices of business activity in the services and manufacturing sectors for August will be released, but we do not expect a strong market reaction given current volatility. The most important thing is that the British pound continues to rise. We cannot state that the chances of seeing a tightening of the Bank of England's monetary policy have sharply increased after the inflation report, as a figure below 3% is not "catastrophic" enough to require immediate intervention from the central bank. Moreover, this marks the first increase in the consumer price index since March 2026. In recent months, despite the war in the Middle East and the blockade of the Strait of Hormuz, inflation in the UK has been declining. No one can reliably predict how events in the Middle East will unfold. Therefore, we will not make predictions such as "inflation will certainly rise." If inflation exceeds 3%, the BOE's stance may become more "hawkish," but we will not have an answer to this question until at least September. Thus, it is highly likely that the BOE will keep its monetary policy unchanged in September.
As for the prospects of the British pound, they remain bullish despite the monetary policy. The weekly timeframe shows a flat market within an upward trend, so movement towards the upper boundary of the sideways channel is the base scenario.
The average volatility of the GBP/USD pair over the past five trading days is 61 pips. For the pound/dollar pair, this value is considered "low." Therefore, on Thursday, August 20, we expect the pair to move within a range bounded by 1.3549 and 1.3671. The upper linear regression channel has turned upward, indicating an upward trend. The CCI indicator has entered overbought territory for the third time, signaling a possible correction.
The GBP/USD currency pair maintains its upward trend. Donald Trump's policies will continue to exert pressure on the U.S. economy, so we do not expect long-term growth for the U.S. dollar. The year 2026 has been super positive for the dollar due to geopolitical factors, but every fairy tale comes to an end. The weekly timeframe shows a flat market between 1.3150 and 1.3780 within a four-year upward trend, supporting the expectation of continued growth for the British currency in the medium term.
Long positions with targets of 1.3611 and 1.3672 can be considered when the price is above the moving average. If the price is below the moving average line, bearish trading can be considered with targets at 1.3489 and 1.3428.
