**GBP/USD Weekly Forecast: Under Pressure as Bank of England Rate Cut Looms**
*Based on the original article published by Yohay Elam on Forex Crunch*
The GBP/USD currency pair has remained under significant pressure over the past week, struggling to find upward traction as economic indicators from the United Kingdom continue to show signs of weakness. With the Bank of England (BoE) approaching what many anticipate to be the first interest rate cut in years, the British pound has been on a steady decline against its U.S. counterpart.
This article will provide an in-depth weekly forecast for GBP/USD, explore the upcoming economic data that could influence the pair, and evaluate how market sentiment is shaping expectations around the BoE’s monetary policy trajectory. We will integrate recent data, expert opinions, and technical analysis to provide a clear view of this vital currency pair.
## Overview of the Past Week
Last week, the British pound weakened further as disappointing economic data from the UK reinforced the view that the BoE may reduce interest rates in the near term. The U.S. dollar, meanwhile, gained support from relatively stable U.S. economic indicators and hawkish stances from Federal Reserve officials.
Notable events and data from the UK included:
– **UK Gross Domestic Product (GDP):** The UK economy showed minor growth in the second quarter, but forward-looking indicators suggest a slowdown may be ahead.
– **Inflation Trends:** Although inflation dipped slightly, it remains sticky in services, raising questions about how soon the BoE might act.
– **PMI Readings:** Both manufacturing and services PMI came in below expectations, indicating that the economy might be heading toward a stagnation period.
These factors contributed to a downward bias on GBP/USD, which dropped to fresh monthly lows during the week.
## Macro Drivers Behind GBP/USD Movement
### UK Economic Data Points
Recent UK macroeconomic reports have emphasized a cooling economy, which is increasing the probability of an interest rate cut by the Bank of England.
– **Inflation Data:** According to the Office for National Statistics (ONS), the headline consumer price index (CPI) rose by just 0.2% month-over-month in June 2025, and 2.0% year-over-year, reaching the BoE’s target. However, core inflation (which excludes volatile items like food and energy) remained at 3.4%, indicating persistent price pressures in services-related components.
– **Employment Trends:** The UK labor market is beginning to soften. While unemployment remains low at 4.2%, wage growth has decelerated from earlier highs of 6.5% to the current level of 5.2%, suggesting reduced inflationary pressures.
– **Retail Sales and Consumer Spending:** Retail sales were flat in June, indicating that consumer spending is beginning to slow. Analysts at ING noted that weaker household consumption could be a signal of more challenges for the UK economy during the latter half of 2025.
– **PMI Readings:**
– Manufacturing PMI came in at 47.5 (contraction territory).
– Services PMI was recorded at 50.1, barely expanding and disappointing market expectations.
These figures strengthen the case for the BoE to initiate a rate-cutting cycle sooner than initially projected.
### Bank of England’s Monetary Policy Outlook
All eyes are on the BoE’s Monetary Policy Committee (MPC), which is scheduled to hold its next meeting in August. Markets are now pricing in a 70% probability of a 25 basis point rate cut.
Key considerations for the BoE:
– The headline inflation rate has returned to the 2% target.
– Growth momentum is slowing.
– External risks, including weaker demand from the Eurozone and lingering implications of Brexit uncertainty, remain pronounced.
BoE Governor Andrew Bailey has recently stated that the committee will assess the “balance of risks” in upcoming meetings, focusing particularly on inflation expectations and wage growth data.
Read more on USD/CAD trading.