**GBP/USD Weekly Forecast: Sterling Slips as Bank of England Prepares for a Potential Rate Cut**
*Originally reported by Yohay Elam on Forex Crunch*
The British pound is facing increased selling pressure against the US dollar as investors brace for a potential interest rate cut by the Bank of England (BoE). A mix of domestic economic concerns, dovish commentary from policymakers, and a firm US dollar has pushed GBP/USD lower over the past week. This trend may continue if market expectations are confirmed by further economic data or monetary policy signals.
This in-depth update explores recent price action, important economic developments, Bank of England policy outlook, and what lies ahead for GBP/USD over the coming weeks.
## GBP/USD Weekly Overview
– GBP/USD dropped below the 1.28 mark, ending the week near 1.2760
– The pair briefly attempted to rally early in the week but faced strong resistance near the 1.2840 zone
– Negative UK economic surprises and US dollar strength provided downward pressure
– Market expectation of an August or September BoE rate cut grows stronger
## UK Economy: A Weakening Outlook
The UK continues to exhibit economic stagnation, with recent data suggesting that the post-pandemic recovery is losing steam. Inflation is moving in the right direction, although not quickly enough to eliminate concerns entirely.
Key Developments:
– **Inflation:** CPI fell to 2.0% year-over-year in June 2025, finally reaching the BoE’s target. Core inflation, however, remains at 3.1%, suggesting persistent pressure.
– **Retail Sales:** UK retail sales dropped 0.6% in June, disappointing forecasts of a 0.2% rise
– **Labour Market:** Wage growth remains elevated around 5.7%, which presents a challenge for the BoE as it tries to get inflation sustainably under control
– **PMI Surveys:** The S&P Global/CIPS Manufacturing PMI declined to 46.4, reflecting contraction in the industrial sector. The services PMI remains above 50 but has been slowing
– **Consumer Confidence:** GfK Consumer Confidence came in at -16, a drop from -11 the previous month, indicating worsening sentiment among households
These factors suggest that the UK economy is teetering on the edge of stagnation, which could increase the BoE’s urgency to support growth through monetary easing.
## Bank of England on the Verge of Cutting Rates?
Markets are increasingly convinced that the BoE will cut interest rates either in its August or September meeting. So far, the central bank has maintained a cautious stance, emphasizing the need for more compelling data showing a sustained drop in inflation and cooling wage pressures.
Recent Comments from Policymakers:
– **Andrew Bailey, Governor of the BoE:** Stated that the bank is “closer to the point” at which policy becomes restrictive enough to consider easing
– **Catherine Mann, MPC Member:** Warned that inflation risks remain, particularly due to sticky wages
– **Huw Pill, BoE Chief Economist:** Suggested inflation data is encouraging but that a “gradual and measured” approach is still warranted
As of early August 2025, futures markets are pricing in about a 64% chance of a rate cut in the month of August, according to CME’s BoEWatch tool.
With the next Monetary Policy Committee (MPC) meeting scheduled for August 8, all eyes will be on inflation, GDP, and employment reports leading up to that date.
## US Dollar Firm as Fed Maintains Higher Rates
On the other side of the equation, the US dollar has remained firm, supported by solid economic performance and a wary Federal Reserve that wants to avoid easing policy prematurely.
Highlights from the US:
– **Inflation:** Core PCE, the Fed’s preferred inflation gauge, rose 2.9% year-over-year in June, still above the 2% target
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