During Wednesday's Asian trading session, the British pound (GBP/USD) held near 1.3500, extending its 0.5% gain from the previous day. The rally was driven by two factors: cooling US inflation, which reinforced expectations of a rate cut, and better-than-expected UK job market data.

The U.S. Consumer Price Index (CPI) rose 2.7% year-on-year in July, the same as the previous value and lower than the market expectation of 2.8%; the core CPI rose 3.1% year-on-year, higher than the market expectation of 3.0%, but still in a downward trend.

This result has further fueled market expectations for a September rate cut by the Federal Reserve. According to the CME FedWatch tool, the probability of a 25 basis point rate cut has risen to 94% from 86% the previous day.

Last week, Federal Reserve Governor Michelle Bowman said three rate cuts might be appropriate this year, providing the market with stronger expectations for policy guidance.

Meanwhile, the pound's strength was boosted by strong UK employment data. The UK added 239,000 jobs in the second quarter, significantly higher than the 134,000 jobs added in the three months to May. The International Labour Organization (ILO) unemployment rate remained at 4.7%, in line with expectations.

The number of people applying for unemployment benefits fell by 6,200 in July, while the market had previously expected an increase of 20,800.

These data have strengthened the market's confidence that the Bank of England will maintain a "gradual" pace of monetary expansion. The next focus will be on Thursday's release of the UK's preliminary second-quarter GDP and June industrial output data, which will provide further direction for the pound's short-term trend.

Market analysts pointed out: "The dual effect of rising expectations of a Fed rate cut and UK employment data has provided solid upward momentum for the pound, but subsequent trends still need to see whether UK economic growth data is equally strong."

On the daily chart, GBP/USD has broken through its short-term downtrend line and is holding above 1.3480. The MACD indicator continues to expand its red bars, and the RSI is above 60, indicating strengthening bullish momentum.

If the price can successfully break through the 1.3550 resistance level, it is expected to rise further to 1.3620. Conversely, if it falls back below 1.3450, it may retest the 1.3400 support level. The short-term technical pattern tends to be volatile and bullish, and data will be the key factor driving the price breakthrough.

Editor's opinion:

The current upward trend of the British pound against the US dollar is largely based on the dual backdrop of a weakening US dollar and the resilience of the UK job market. However, it is important to note that the sustainability of UK economic growth remains challenging, and market sentiment could quickly reverse if GDP or industrial data released on Thursday fall short of expectations.

In addition, uncertainty about the pace of the Fed's interest rate cuts may also cause fluctuations.