**GBP/USD Weekly Forecast: Range-Bound Ahead of BoE, Fed Cut Decisions**
*By Yohay Elam, originally published on Forex Crunch*
The GBP/USD pair has experienced a period of consolidation, finding itself range-bound as market participants await two major central bank policy decisions—the Bank of England (BoE) and the Federal Reserve (Fed). With both central banks set to announce interest rate decisions that could potentially shape the trajectory of the currency pair for the remainder of 2025, traders are exercising caution. This article provides an in-depth analysis of the key drivers, technical outlook, and fundamental factors likely to influence GBP/USD in the coming week, synthesizing insights originally reported by Yohay Elam for Forex Crunch.
### Central Bank Spotlight: BoE and Fed Poised for Policy Shifts
#### Bank of England: Market at a Crossroads
The BoE is facing significant pressure to balance a slowing economy against stubbornly high inflation. This dynamic has kept policymakers on edge and GBP traders on high alert.
– **Inflation**: The latest UK CPI figures showed a decline from recent highs, yet inflation remains above the BoE’s 2 percent target. This complicates the central bank’s policy calculus, as premature rate cuts could reignite price pressures, while maintaining elevated rates risks exacerbating economic stagnation.
– **Economic Activity**: Growth metrics including GDP and retail sales have shown signs of fatigue. The softening economic data has stoked expectations for a dovish turn.
– **Labour Market**: While wage growth has eased slightly, the labor market remains relatively tight, moderating the urgency for aggressive easing.
Markets are currently pricing in the likelihood of a rate cut from the BoE in the coming months. The timing and scale of such a move, however, remain contingent on upcoming data releases and the tone struck by BoE Governor Andrew Bailey during the press conference.
#### Federal Reserve: Cautious Optimism
On the other side of the Atlantic, the Federal Reserve is also contemplating its next steps. Having paused rate hikes in 2024, the Fed has signaled that rate cuts are on the horizon, but policymakers are taking a measured approach.
– **US Inflation**: Similar to the UK, US inflation has moderated but remains a concern. The Personal Consumption Expenditures (PCE) index, which is closely followed by the Fed, has shown signs of cooling.
– **Labor Market**: Employment data has stayed robust, with job creation consistently beating expectations. However, signs of softening in wage growth suggest the economy is starting to feel the impact of previous rate hikes.
– **Growth**: US GDP growth has exceeded expectations, powering dollar strength and keeping yields elevated.
Market participants are increasingly split regarding the timing of the Fed’s initial rate cut. While some economists anticipate a move in the third quarter, stubborn inflation could delay any action.
### Range-Bound Trading: What is Keeping GBP/USD in Check?
The GBP/USD exchange rate has been confined to a relatively narrow band in recent weeks. Several factors are contributing to this period of indecision:
– **Yield Differential**: UK and US bond yields are moving in tandem, diminishing the incentive for large speculative flows between the pound and the greenback.
– **Macro Uncertainty**: Both economies are facing a delicate balancing act between inflation and growth, leading to a wait-and-see approach.
– **Risk Sentiment**: Geopolitical tensions, including ongoing trade disputes and potential escalations in Eastern Europe, have created a risk-off environment that limits volatility in currency markets.
Until markets receive clear signals from the BoE and the Fed regarding the future path of monetary policy, GBP/USD is likely to remain range-bound, with traders opting to keep positions light ahead of the events.
### Key Events and Data Releases for the Week
Traders should focus on the following economic events and data releases, which have the potential to impact GBP/USD:
– **BoE Monetary
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