**GBP/USD Weekly Forecast: Under Pressure Ahead of Potential BoE Rate Cut**
*Based on original analysis by Yohay Elam of Forex Crunch with supplemental research and data compiled for enhanced context and detail.*
The British pound faces mounting headwinds against the U.S. dollar as markets set their sights on the Bank of England’s (BoE) next policy meeting. Traders and analysts increasingly price in the potential for a near-term rate cut, spurred by slowing economic growth, a weakening labor market, and dovish moves from other global central banks. As the pound drifts near monthly lows, the GBP/USD pair remains vulnerable to bearish momentum.
This article examines the key drivers of recent GBP/USD movement, factors influencing upcoming BoE decisions, macroeconomic conditions in both the UK and the US, and technical indicators that could guide the currency pair’s next leg.
## Overview of GBP/USD Performance
The British pound traded on the back foot throughout the past week, underperforming against a dollar that continued to benefit from persistently strong U.S. economic data and safe haven flows. The GBP/USD pair dropped below 1.2800 during the week and flirted with the 1.2700 level at times.
Key highlights from recent GBP/USD activity:
– GBP/USD closed lower for the third straight week
– The pair dropped from around 1.2850 to lows near 1.2706
– Sterling saw limited support despite strong inflation figures
– The Federal Reserve’s hawkish posture helped lift the U.S. dollar
The shift reflects broader market positioning ahead of the BoE’s highly anticipated August monetary policy meeting, where a rate cut is now firmly in focus.
## Bank of England Policy Outlook
The central bank meets on August 8th, and investors will be watching closely to see whether policymakers decide to begin loosening monetary policy amid a weakening UK economy.
Key factors influencing the BoE’s potential policy pivot:
– Weak economic growth: The UK economy showed signs of stagnation in the second quarter, with GDP data indicating weaker-than-expected performance. Services, construction, and manufacturing all experienced slowdowns.
– Labor market cooling: Unemployment rose to 4.4% in May 2025 compared to 4.2% in April. Job vacancies also declined, a sign of weakening labor demand.
– Diminishing wage pressures: Wage growth, while still above 5% annually, has begun to moderate, reducing the risk of wage-driven inflation.
– Slowing inflation: June’s Consumer Price Index (CPI) fell to 2.2% year over year, very near the BoE’s 2% target, fueling expectations of rate cuts.
– Global central bank trend: The European Central Bank (ECB) has already initiated rate cuts, while the U.S. Federal Reserve is expected to deliver its first cut in September. This policy shift applies additional pressure on the BoE to avoid holding overly tight monetary conditions.
Markets are now pricing in a 60% chance of a BoE rate cut in August, according to Bloomberg’s implied probability based on overnight index swaps.
## UK Economic Data Snapshot
The latest economic indicators continue to paint a picture of a fragile recovery and slowing inflation, prompting renewed debate over whether the BoE has room to ease.
Recent key UK economic indicators:
– Inflation (CPI): June CPI YoY fell to 2.2%, down from the previous 2.6%, returning close to target for the first time since 2021.
– Unemployment Rate: Rose to 4.4%, the highest level since early 2023
– Average Earnings: Wages excluding bonuses rose by 5.7% in the three months to May 2025, slower than earlier in the year but still historically high
– Retail Sales: Contracted 0.8% month-on-month in June, reflecting softer consumer spending
– Manufacturing PMI: Registered at 47.6 for July
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