**GBP/USD Weekly Forecast: Sterling Pressured as BOE Cut Looms**
*Based on the original article by Yohay Elam at Forex Crunch and supported by additional market research.*
The British pound is facing increasing pressure against the US dollar, with the GBP/USD pair trading defensively as market expectations coalesce around a possible rate cut from the Bank of England (BOE) in the coming months. The subdued performance of Sterling comes amid a combination of weaker-than-expected economic indicators, cautious commentary from BOE officials, and the relative strength of the US dollar due to its own set of macroeconomic trends and hawkish undertones from the Federal Reserve.
This week, the GBP/USD exchange rate traded lower, marking a continued bearish bias that began several weeks earlier. Traders and investors are recalibrating their positions as the likelihood of a dovish tilt from the BOE intensifies.
## Key Drivers of GBP/USD Weakness
### 1. Growing Speculation of a BOE Rate Cut
– Financial markets are increasingly pricing in a 25 basis-point rate cut by the Bank of England.
– Recent dovish comments from BOE Governor Andrew Bailey and other Monetary Policy Committee (MPC) members have added credibility to these expectations.
– BOE policymaker Swati Dhingra, known for her dovish leanings, reiterated her preference for a rate cut to support economic growth.
– Upcoming inflation and labor market data could either reinforce or dampen those forecasts.
The narrative has shifted. The Bank of England, which once signaled a firm stance against inflationary pressures, is now revealing concern over slowing economic growth and persistent weakness in consumer spending and industrial production.
### 2. UK Macroeconomic Data Suggests Cooling
Economic indicators from the UK have failed to inspire confidence.
– June CPI data showed inflation easing, with core inflation declining more than expected to 4.8% year-over-year.
– UK PMI (Purchasing Managers’ Index) figures fell short of forecasts, with manufacturing still contracting and services growth losing momentum.
– Retail sales volumes contracted by 1.2% month-over-month in June, signaling weakening consumer demand.
The drop in inflation, while welcomed by households, is interpreted by markets as easing pressure on the BOE to maintain its restrictive policy stance. Weakening output and consumption figures only add to the dovish tilt.
### 3. Resilient US Economy Supports Dollar Strength
The dollar’s strength is another complicating factor for GBP/USD.
– The July US Non-Farm Payrolls (NFP) report showed job creation averaging over 200,000 for a third straight month.
– US Core Personal Consumption Expenditures (PCE), the Fed’s preferred inflation gauge, remains sticky above the central bank’s 2% target.
– Fed Chair Jerome Powell insisted in his latest remarks that the Federal Reserve remains open to further hikes if inflation does not fall fast enough.
This solid macro backdrop in the United States keeps the dollar strong relative to other major currencies, including the pound. While the BOE is cautious of overtightening, the Fed continues to convey confidence in the state of economic expansion across the Atlantic.
## Technical Analysis: GBP/USD Facing Key Support Levels
From a technical outlook, the GBP/USD pair continues to trade within a bearish channel.
– The pair broke below the key psychological level of 1.2700 and failed to rebound meaningfully.
– The next support lies around the 1.2540 zone, a level last tested in early May.
– Below this support, the 1.2440 region could come into focus if the downtrend extends.
– Resistance is expected at 1.2670, followed by the 1.2755 area if bulls attempt to reclaim strength.
Momentum indicators are signaling weakness, with the Relative Strength Index (RSI) below 50 and Moving Averages beginning to turn southward. This implies the path of least resistance in the near term remains to the
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