**GBP/USD Weekly Forecast: UK Growth Fears Ignite Cut Odds**
*By Yohay Elam, ForexCrunch.com*
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The British Pound (GBP) faced turbulent trading against the US Dollar (USD) throughout the past week, as mounting concerns over the United Kingdom’s economic outlook stoked speculation about imminent Bank of England (BoE) rate cuts.
With volatility high and the economic calendar heavy, GBP/USD whipsawed in response to a slew of domestic and international developments—including softer UK macro data, fluctuating market sentiment, and shifting expectations for central bank policy from both sides of the Atlantic.
This GBP/USD weekly forecast explores:
– The major drivers behind recent pound weakness
– How rising UK growth concerns are fueling bets on BoE action
– Technical analysis of key GBP/USD levels
– The outlook for the week ahead, including crucial data releases
– The broader implications for FX markets
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## Pound Under Pressure: UK Data Disappoints
The sterling began the week on a fragile note. Recent UK data painted a dour picture of the nation’s economic momentum:
– **GDP Stagnates:** May’s GDP figure showed zero month-on-month growth, missing forecasts and underlining persistent slack in the British economy.
– **Manufacturing Output Weakness:** Industrial and manufacturing production both missed expectations, adding to nagging worries about the health of the UK’s key sectors.
– **Labor Market Cools:** The latest jobs report pointed to a cooling of the UK labor market—reflected in stagnant wage growth and a slight uptick in the unemployment rate.
With economic clouds gathering, markets immediately started to reprice their outlook for BoE monetary policy. Weak growth, particularly with the threat of inflation receding, typically increases pressure on a central bank to lower rates and stimulate activity.
**Highlights from UK Economic Data:**
– May GDP: 0.0% m/m vs expected +0.2%
– May industrial production: -0.2% m/m (below forecast)
– Unemployment rate: 4.4% (inching up, highest since pandemic peak)
This data flurry signaled the UK may be at risk of sliding toward stagnation or even recession—a narrative that has weighed heavily on the pound.
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## Market Reaction: Rate Cut Odds Escalate
Weak domestic numbers, combined with global growth jitters, saw traders pile into bets that the BoE would need to cut rates sooner rather than later. Throughout the week, money markets increasingly priced in the strong likelihood of a rate cut as early as the next BoE meeting.
**Key drivers:**
– **Diminishing Inflation Risks:** UK inflation has steadily cooled, reducing the urgency for restrictive policy.
– **Growth Fears:** Data has pointed to broader economic frailty, giving policymakers room to ease.
– **Global Rate Easing Theme:** With other central banks (notably the European Central Bank and the Bank of Canada) starting their cutting cycles, pressure mounts for the BoE to follow.
**Current market pricing:**
– Implied probability of a 25bps cut at August’s BoE meeting has surged above 70%
– Full 50bps of easing now seen by November, according to interest rate swap markets
Expectations for faster action by the BoE have directly undermined the pound, eroding the UK’s yield advantage and denting foreign investor appetite for GBP assets.
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## US Dollar Moves Add Complexity
GBP/USD does not trade in a vacuum. The greenback has also seen its fair share of swings, influenced by Federal Reserve signals and broader risk trends.
**US Drivers This Week:**
– **Fed Policy Outlook:** Hotter-than-expected US inflation data earlier in the week initially saw the dollar rise, as traders pared back expectations for Fed rate cuts. However, dovish tones from Federal Reserve officials and mixed macro reports tempered those gains.
– **Risk Appetite:** Renewed trade tensions and global growth concerns at times triggered safe-h
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