Sterling Surges as Market Sentiment Boosts Risk Assets

The Pound Sterling is rallying against most major currencies today, riding a wave of positive market sentiment that's favoring riskier assets. As someone who's been watching this market closely, I'm not surprised to see the pound flexing its muscles again – it's about bloody time!

Looking at the UK economic landscape, Friday's upcoming GDP data could throw a wrench in this momentum. The economy is expected to have flatlined in July after June's 0.4% growth. Manufacturing and industrial production figures are also projected to stagnate. If these predictions materialize, I'm afraid we'll see increased pressure for the Bank of England to cut rates further this year – something I personally think would be premature.

Meanwhile, the BoE is widely expected to maintain rates at 4% next week. Smart move in my view, given the stubborn inflation we've been experiencing.

Across the pond, the dollar seems oddly calm despite Tuesday's bombshell Nonfarm Payrolls Benchmark Revision showing 911K fewer jobs than previously estimated. This is absolutely devastating data that should be sending shockwaves through markets! Yet traders seem fixated on the upcoming Fed meeting instead.

Today's US Producer Price Index data will be crucial, particularly as markets assess the impact of Trump's tariffs. Economists expect headline PPI to hold steady at 3.3% annually, while core PPI might ease to 3.5% from 3.7%. FOMC members have been downplaying tariffs' inflationary effects, but I'm skeptical – these people consistently underestimate real-world economic impacts.

Tomorrow's CPI release will be even more critical in determining the Fed's rate cut trajectory. The CME FedWatch tool shows a measly 8.4% chance of a 50bps cut, with markets overwhelmingly betting on a standard 25bps reduction.

Technically, GBP/USD is consolidating around 1.3530, trapped in an Ascending Triangle pattern that screams indecision. The pair is hovering near its 20-day EMA (1.3487), with RSI between 40-60, confirming this sideways trend. Key support sits at 1.3140, while 1.3800 represents significant resistance.

If the UK data disappoints and US inflation surprises to the upside, I wouldn't be shocked to see this rally quickly evaporate – currency markets have been notoriously fickle lately, and I've been burned before expecting sustained pound strength.