The GBP/USD pair showed only a muted reaction to the latest report on inflation in the UK. The pound against the dollar barely reacted to the release, as the market is focused on the Jackson Hole Economic Symposium, which begins on Thursday, August 21.

Still, the spotlight is not on the symposium itself, but on Federal Reserve Chair Jerome Powell's speech scheduled for Friday. The importance of this event is difficult to overestimate, given that Powell will comment for the first time on July's weak Nonfarm Payrolls and the unexpectedly strong U.S. inflation reports (CPI/PPI). It can be assumed that Powell will either take a dovish stance, expressing concern over the slowdown in the U.S. labor market, or adopt a cautious position, emphasizing the acceleration of key inflation indicators. In other words, either the probability of a Fed rate cut in September will rise to 90–100%, or it will fall to a "50/50" balance.

The intrigue remains, and the stakes are high. That is why traders are reluctant to open large positions—neither in favor of the dollar nor against it. Unsubstantiated rumors that Powell may signal a wait-and-see stance in September are providing background support to the greenback (and therefore to GBP/USD sellers), but overall the pair remains suspended "between a rock and a hard place."

This is precisely why traders virtually ignored the key macroeconomic report, which favored the British currency. Almost all components of the release came out in the "green zone," reflecting accelerating inflation. There is no doubt that the data will resurface later—for example, at the next Bank of England meeting.

Breaking it down in detail:

• The headline Consumer Price Index rose 0.1% m/m, while most analysts had forecast a decline of the same magnitude.
• On an annual basis, headline CPI jumped in July to 3.8% (forecast 3.7%)—its highest level since January 2024. This is the second consecutive month of upward movement.
• Core CPI (excluding energy and food) also increased to 3.8% y/y (forecast 3.7%). This level was last reached in April this year and, before that, in April 2023.
• The Retail Price Index, often referenced in wage discussions, accelerated to 4.8% in July, while expectations were at 4.6%—the fastest growth since February 2024.
• Inflation in services rose to 5.0%, signaling persistent domestic price pressures.

Key drivers of July inflation were airfares, food, and hotel/restaurant services. For example, airline ticket prices surged 30.2% in a single month—the strongest pace since inflation began to be tracked monthly (since 2001). Other categories also contributed, such as shipping costs and automotive fuel. Food and non-alcoholic beverages inflation accelerated to 4.9%, the highest since February 2024.

Many analysts believe the UK annual headline CPI is moving toward a peak of 4.0%, likely to be reached in September or October.

What does this report mean? At the very least, it implies that the Bank of England will not cut rates at its September meeting. A rate reduction at the remaining two meetings this year is also in question. Some analysts (for instance, Capital Economics) allow for a November cut, citing the mixed UK labor market report (unemployment stable at 4.7% while average earnings slowed to 4.6%). However, in my view, the BoE will adopt a more hawkish stance—even in November.

Several factors support caution: the MPC remains divided (four members voted to keep rates unchanged), and the UK economy is showing modest growth (GDP up 0.4% m/m and 0.3% q/q, both in the "green zone"). As for the labor market, there are positive signs too: unemployment benefit claims fell by 6,000 in July, while analysts had expected a 20,000 increase.

All this suggests that the next round of rate cuts may not come until next year. Such conclusions are inherently supportive for the pound and, by extension, GBP/USD buyers. However, at present, sterling cannot dictate terms in the pair—the "Powell factor" exerts downward pressure, preventing buyers from taking control.

Given that traders ignored even such a significant release as the UK CPI report, long positions on GBP/USD look risky. At the moment, the price is testing intermediate support at 1.3450 (the lower Bollinger Band on the H4 timeframe). If this level is broken, the next bearish target will be 1.3390—the lower boundary of the Kumo cloud on the same timeframe.