The GBP/USD pair continues to rise, which I consider a fully justified move. Last week's reports on the US economy and labor market put an end to speculation over whether the FOMC will raise interest rates in September. Nonfarm Payrolls declined for the fourth consecutive time, but this time the figure was not only low but also fell below zero. Thus, the number of jobs in the US economy is no longer merely growing very slowly; it is declining. A similar situation occurred several times last year, and the Fed then had to cut interest rates three times to prevent a further deterioration in the labor market. In recent weeks, there has been considerable speculation in the market that high inflation would force the Fed to raise rates. Kevin Warsh also spoke about excessive inflation that needed to be brought back to the target level as soon as possible. However, as I expected, inflation is not the only factor that matters. Given the current Nonfarm Payrolls figures, I no longer expect monetary policy tightening. This is negative for the dollar. Tomorrow, the US July inflation report will be released, and if it shows a slowdown, the FOMC will have virtually no reason to tighten policy. I would remind you that the market began pricing in a rate hike two months ago, and it is now facing a new wave of disappointment every week. I believe the dollar's decline will continue.

As I have already noted, geopolitics is no longer providing support for the dollar, as new escalations in the conflict occur approximately once every two weeks, while negotiations between the United States and Iran have effectively stalled. Officially, Tehran is negotiating only with Oman. It remains unclear what these negotiations will lead to in terms of ending the conflict and reopening the Strait of Hormuz. Iran may be able to agree with Oman on the terms for controlling the Strait of Hormuz, but how would this resolve the conflict with the United States and lift the US blockade of the strait?

At the beginning of the new week, oil prices rose to $90 per barrel. If the situation develops according to the most pessimistic scenario, oil prices will continue to rise and retest the March–May highs. In this case, inflation in the United States or the United Kingdom could begin to accelerate again. If the situation develops according to the optimistic scenario, oil prices will return to the $60–70 per barrel range. In that case, Fed policy tightening may not be necessary, while the Bank of England is currently not facing significant pressure from high inflation. However, at present, it is the Fed that is unable to take a hawkish step, while the Bank of England, by contrast, would be prepared to tighten monetary policy only if inflation begins to accelerate, for which there are currently no signs.

Chart analysis indicates a new bullish advance. At present, traders have two bullish imbalances (24 and 25), within which buying opportunities can be considered. Imbalance 24 has already generated a bullish signal that traders could have acted on by opening long positions. There are currently no bearish patterns.

The economic news flow on Tuesday was extremely weak. Therefore, I do not expect any strong moves by the end of the day. The bulls remain positive, and only the US inflation report could negatively affect their sentiment this week.

Overall, the fundamental backdrop remains such that, in the long term, I see little reason to expect anything other than a decline in the US dollar. The war between Iran and the United States has not changed this outlook. The possibility of Fed rate hikes in 2026 has not changed it either. Geopolitical developments prompted the market to focus on the dollar's safe-haven status for several months, but the conflict has already passed its active phase. The probability of FOMC monetary policy tightening has declined significantly in recent weeks, putting pressure on the US currency. Therefore, in my view, any strengthening of the dollar is temporary and driven by short-term factors. I see no reason for a new bearish advance.

US and UK Economic Calendar:

• US – Consumer Price Index (12:30 UTC).

On August 12, the economic calendar contains one release of critical importance. The economic backdrop will affect market sentiment during the second half of the day on Wednesday.

GBP/USD Forecast and Trading Advice:

The long-term outlook for the pound remains bullish. After liquidity was swept from the two most recent swings, the bulls began an advance, followed by a corrective pullback and another bullish move. Next week, I expect the pound's rise to continue, as the US labor market reports were weak and the probability of FOMC monetary policy tightening is now extremely low. The US inflation report will be released this week and could further convince traders that Fed policy tightening is unlikely. If the bears begin a new advance, bearish patterns will be required for sell trades, but there are currently none. The bulls received a buy signal from Imbalance 24. The targets for further growth in the pound are the highs from July 15 and May 1 at 1.3557 and 1.3656, respectively.