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18.08.202605:07 Forex Analysis & Reviews: GBP/USD Review. August 18. The Pound Prepares for High Inflation

Relevance up to 22:00 2026-08-18 UTC--4

Exchange Rates 18.08.2026 analysis

The GBP/USD currency pair continued its upward movement on Monday, but as we warned, volatility was low. On the first trading day of the new week, there were no important geopolitical, macroeconomic, or fundamental events. The market continued its momentum in buying U.S. currency, which explains the slight strengthening of the pound.

However, this week, traders will encounter a significant number of important data points from the UK. Some reports may influence the future of the British currency. First and foremost is inflation, which will be published on Wednesday. This report will answer the question of whether the Bank of England can tighten monetary policy in the near future. Recall that the market has recently considered two facts. First, Andrew Bailey warned in the spring that inflation in the UK could accelerate in the second half of 2026. Second, the BoE indicated at its last meeting that tightening was unlikely given the current macroeconomic data. Thus, to increase the probability of a rate hike, inflation must accelerate.

According to forecasts, the consumer price index (CPI) in July is expected to be 2.9-3.0%. Meanwhile, core inflation may slow to 2.5%. Which of these indicators is more important? We believe that the core figure, which may show growth, is critical. Not a substantial increase, according to forecasts, but growth. If the Strait of Hormuz remains blocked, inflation could easily rise to 3.5%. This level would suggest "hawkish" intervention by the BoE.

Thus, the inflation report on Wednesday is rightly the most important report of the week, at least for the GBP/USD pair. In our opinion, the pound, like the euro, should continue to rise regardless of the fundamental and macroeconomic backdrop. Practically all global factors currently do not support the dollar. Therefore, it is not particularly important what the specific inflation level will be in July in Great Britain. The dollar may continue to decline based on technical factors (movement within a sideways channel on the daily timeframe from the lower boundary to the upper), geopolitical factors (the situation in the Middle East is not worsening, and the geography of the conflict is not expanding), macroeconomic factors (all the most important reports in the U.S. have recently failed), and fundamental factors (the probability of the Federal Reserve tightening its monetary policy in the near future has sharply decreased).

By the end of the year, we expect the GBP/USD pair to return to the highs of the last four years, around the 39 level, and possibly break those highs. The GBP/USD pair has been correcting within a global upward trend for more than a year, so now is the time to think about resuming the trend. The dollar has utilized all its growth factors in 2026.

Exchange Rates 18.08.2026 analysis

The average volatility of the GBP/USD pair over the past five trading days as of August 18 is 48 pips. For the pound/dollar pair, this value is considered "low." Thus, on Tuesday, August 18, we expect movement within a range bounded by 1.3506 and 1.3602. The higher linear regression channel is directed downward, indicating a downward trend. The CCI indicator has entered overbought territory for the third time, again warning of a possible correction.

Nearest Support Levels:

  • S1 – 1.3550
  • S2 – 1.3489
  • S3 – 1.3428

Nearest Resistance Levels:

  • R1 – 1.3611
  • R2 – 1.3672
  • R3 – 1.3733

Trading Recommendations:

The GBP/USD currency pair maintains its upward trend. Donald Trump's policies will continue to exert pressure on the U.S. economy, so we do not expect long-term growth for the U.S. dollar. The year 2026 has been super positive for the dollar due to geopolitical factors, but every fairy tale comes to an end. A range persists on the weekly timeframe between levels 1.3150 and 1.3780 within a four-year upward trend, supporting the expectation of continued growth for the British currency in the medium term. Long positions with targets of 1.3602 and 1.3611 can be considered when the price is above the moving average. If the price is below the moving average line, bearish trading can be considered, with targets at 1.3428 and 1.3367.

Explanations for the Illustrations:

  • Linear regression channels help determine the current trend. If both are directed in the same way, the trend is strong right now;
  • The moving average line (settings 20,0, smoothed) defines the short-term trend and the direction in which trading should currently be conducted;
  • Murray levels are target levels for movements and corrections;
  • Volatility levels (red lines) represent the probable price channel in which the pair will operate over the next day, based on current volatility readings;
  • The CCI indicator entering the oversold area (below -250) or the overbought area (above +250) indicates that a trend reversal in the opposite direction is approaching.

*A análise de mercado aqui postada destina-se a aumentar o seu conhecimento, mas não dar instruções para fazer uma negociação.

Paolo Greco,
Analytical expert of InstaSpot
© 2007-2026
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