GBP/USD surged to a new 2024 high of 1.3129 on Thursday, driven by stronger-than-expected UK flash PMI data for August. The upbeat economic indicators have fueled speculation that the Bank of England (BoE) might delay or slow down the pace of its anticipated rate cuts, providing further support for the pound. With this momentum, sterling bulls appear to be setting their sights on the July 2023 peak at 1.3144. The divergence in rate expectations between the BoE and the Federal Reserve is solidifying the pound’s leadership position among major currencies in 2024, aided by the UK’s comparatively robust interest rate outlook.

Despite the BoE’s decision to cut rates on August 1, sterling has shown remarkable resilience, climbing 3.1% year-to-date and recovering 3.67% from its August 8 low. The rally from the post-cut lows was accompanied by a significant reduction in speculative long positions on GBP in the IMM market, with contracts falling from a record high of +142k on July 23 to +47k as of August 13. This reduction in long positions may have set the stage for the recent rebound, as the upbeat PMI data suggests a shift in the underlying catalyst for sterling strength. Initially driven by high rates due to inflation concerns, the focus may now be shifting towards high rates supported by economic growth, indicating a potential soft landing for the UK economy.

Technically, GBP/USD is in a strong uptrend, with bulls targeting the July 2023 high at 1.3144 as the next significant resistance level. A break above this level could pave the way for further gains, with the March 2022 weekly highs at 1.3181 and 1.3299 coming into focus. The pair's recent ascent has been supported by positive technical indicators, including a bullish momentum in the Relative Strength Index (RSI) and the pair’s ability to stay above key moving averages.

However, the sterling’s rise has faced some headwinds in the New York afternoon session, with the pair retreating slightly to 1.3083, down 0.07%. This pullback comes as U.S. Treasury yields rise and market participants temper their expectations for aggressive Fed rate cuts ahead of Federal Reserve Chair Jerome Powell’s speech at the Jackson Hole symposium on Friday. The IRPR is currently pricing in a 24% probability of a 50bps cut in September, with a total of 96bps of cuts expected by the end of 2024. Meanwhile, the BoE is priced with a 28% chance of a 25bps cut in September and an additional 40bps of cuts by year-end.

Support levels to watch include the Thursday low at 1.3081, followed by the 55-hour moving average at 1.3058 and the 23.6% Fibonacci retracement of the 1.2666-1.3130 move at 1.3020. If GBP/USD can maintain its position above these levels, the bullish outlook remains intact, with the possibility of further gains if Powell’s speech does not surprise with a more hawkish tone than anticipated.

In summary, GBP/USD has reached a new 2024 high, driven by stronger-than-expected UK PMI data and diverging rate expectations between the BoE and the Fed. While the pair faces some near-term resistance, the broader uptrend remains intact, with bulls eyeing the July 2023 peak and potentially higher levels if market conditions remain favorable.