**GBP/USD Weekly Forecast: UK Growth Fears Ignite Cut Odds**
*originally by Yohay Elam, ForexCrunch.com*
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### Overview
The GBP/USD pair faced renewed pressure last week as concerns over UK growth intensified, amplifying expectations for rate cuts by the Bank of England (BoE). Sterling tumbled against the US dollar, falling to multi-week lows as economic indicators suggested that the British economy faces mounting headwinds. Meanwhile, the Federal Reserve’s cautious stance and steady US data offered the greenback ongoing support. This week, traders brace for more volatility as critical UK data and US CPI loom, with central bank rhetoric adding further uncertainty.
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### Weekly Performance Summary
– GBP/USD started the week close to 1.2800 but slipped as low as 1.2640, ending with a notable loss.
– Sterling was pressured by weaker-than-expected data and dovish commentary from BoE officials.
– The dollar gained ground amid resilient US data and lingering risk-off sentiment.
– Rate cut bets for the BoE swelled as growth signals faded, pushing yields and sterling lower.
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### Key Drivers Last Week
#### 1. UK Growth Jitters
The market’s concern over UK growth dominated sterling sentiment:
– Monthly GDP for May showed zero growth, missing forecasts for a modest expansion.
– Industrial production remained subdued, with output contracting again in May.
– Construction output also disappointed, revealing sharp declines amid higher interest rates and fragile demand.
– The British Chambers of Commerce and other industry bodies cited rising business pessimism, underscoring elevated recession risks.
**Implications:**
– Weaker growth spurred speculation that the BoE may cut rates sooner rather than later.
– Some analysts brought forward their expectations for a cut as early as August, rather than September or beyond.
#### 2. Dovish Bank of England Signals
Several BoE policymakers adopted a more cautious tone:
– BoE Governor Andrew Bailey and MPC member Swati Dhingra suggested the “case for loose policy is gaining ground.”
– Chief Economist Huw Pill noted “subdued” economic activity and emphasized downside risks.
– Markets interpreted these statements as clear indications that the BoE is preparing for a rate cut in the coming meetings.
#### 3. US Dollar Resilience
While sterling stumbled, the US dollar continued to benefit from:
– June ISM Services PMI beat consensus, allaying fears of a US slowdown.
– Initial jobless claims remained near historic lows, emphasizing labor market robustness.
– Federal Reserve officials, including Jerome Powell, maintained a “wait-and-see” stance, tempering expectations for rapid US easing.
– Renewed global risk aversion amid geopolitical tensions in the Middle East and Ukraine helped underpin the dollar.
#### 4. Political and Fiscal Uncertainty
– Labour’s landslide victory in the UK general election provided only brief support for GBP/USD.
– Investors quickly focused on the government’s daunting fiscal challenges and the weak macro backdrop.
– Bond market moves suggested that fiscal discipline, not just party politics, will shape sterling over the medium term.
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### Economic Data Highlights
**UK:**
– **Monthly GDP (May):** 0.0% vs expected +0.2%; previous +0.2%
– **Industrial Production (May):** -0.6% vs expected -0.2%; previous -0.9%
– **Construction Output (May):** -1.1% vs expected +0.1%; previous -1.4%
– **Trade Balance:** Remains in deficit, with imports outpacing sluggish exports
**US:**
– **ISM Services PMI:** 53.9 vs expected 52.7; previous 53.8
– **Initial Jobless Claims:** 220K vs expected 225K; previous 219K
– **FOMC Minutes:** Confirmed cautious optimism, no hurry to cut rates
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### Market
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