GBP/USD surges as BoE holds firm while Fed rate cut expectations grow

GBP/USD has climbed 0.5% to 1.2850 as diverging central bank expectations drive sterling strength against the dollar. Markets are pricing in a hawkish Bank of England stance with inflation remaining elevated at 4.2%, well above the 2% target, while weak US economic data has increased Federal Reserve rate cut probabilities to 75% for September. The pound found strong support at 1.2800 (50-day moving average) before breaking through resistance at 1.2830. Technical indicators show bullish momentum with RSI at 65, suggesting further upside potential toward 1.2900. The divergence in monetary policy outlook between the UK and US is expected to continue supporting GBP/USD in the near term. Traders should watch Wednesday's UK CPI data and Thursday's US retail sales for potential catalysts that could either reinforce or challenge the current bullish trend.