GBP/USD holds its strengths despite hawkish FOMC minutes

• GBP/USD trades near 1.2740, after hitting a daily high of 1.2766 previously in the session.
• FOMC minutes showed that members were deeply concerned with upside inflation risks. 
• GBP is holding strong after hot inflation figures from July from the UK reported during the European session.

After the release of July’s Federal Open Market Committee (FOMC) minutes, the GBP/USD saw little change. Despite members sounding hawkish, if failed to trigger a significant reaction on the USD, the GBP continues to trade strong amid hot inflation figures from the UK and hawkish bets on the Bank of England.

Minutes showed that members were concerned with the upside inflation risks due to a hot labour market and left the door open for another hike, at least for this cycle. The immediate reaction was a slightly upwards movement of the US DXY index and the US Treasury bond yields, but the GBP/USD held its ground.

It will all come down to incoming data. Overall the US economy shows strong economic activity and a robust labour market while inflation retreats. Before the September meeting, the Federal Reserve (Fed) will receive an additional Nonfarm Payrroll and Consumer Price Index (CPI) report and medium-tier economic activity figures from August. As for now, according to the CME FedWatch tool, markets bet that the Fed will pause in September and foresee 40% odds of a 25 basis points hike in November.

GBP/USD Levels to watch

According to the daily chart, the technical outlook for the GBP/USD remains neutral to bullish as the bulls are recovering ground. With an ascending slope below its midline, the Relative Strength Index (RSI) suggests a potential increase in buying pressure, while the Moving Average Convergence (MACD) exhibits lower red bars. On the other hand, the pair is above the 20-day Simple Moving Average (SMA), below the 100-day SMA, but above the 200-day SMA, indicating that the bulls still have the upper hand looking at the broader picture.

Support levels: 1.2730, 1.2715, 1.2700.

Resistance levels: 1.2760, 1.2780, 1.2800.

GBP/USD Daily chart