**GBP/USD Weekly Outlook: Is Cable Topped?**
*By Fiona Cincotta, Forex.com News and Analysis*
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**Summary**
– GBP/USD struggled to move higher, signaling potential topping.
– The pair faces strong headwinds from fundamental and technical perspectives.
– UK data and Bank of England (BoE) signals underpin sell-off risks.
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**Introduction**
Last week, the British pound (GBP) slipped against the US dollar (USD), with the GBP/USD pair—also known as “Cable”—retreating from its recent 15-month highs. The combination of softer UK economic data, persistent inflation worries, and growing divergence between the Federal Reserve and the Bank of England (BoE) has prompted investors to question whether Cable has finally topped.
In this in-depth weekly outlook, we’ll explore the key drivers behind GBP/USD’s price action, examine the evolving macroeconomic landscape, and analyze the technical structure of the chart. By the end, traders should have a clearer understanding of what lies ahead for the currency pair.
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**UK Pound Struggles at Multi-Month Highs**
GBP/USD ran into stiff resistance last week, failing to break beyond 1.2850. This reversal comes after a robust uptrend driven primarily by US dollar weakness and relative optimism regarding the UK’s resilience. However, the recent shift in investor sentiment suggests GBP bulls are running out of steam.
**Key reasons for GBP/USD’s recent struggles include:**
– **Weaker-than-expected UK economic data.**
Recent releases, including GDP, retail sales, and PMIs, have highlighted a stalled recovery and persistent structural challenges in the UK economy.
– **Sticky UK inflation, but BoE signaling dovishness.**
Despite inflation remaining above target, the BoE has begun to indicate that interest rate cuts are still on the table for this year, diverging from market pricing.
– **Resilient US dollar amid risk aversion.**
Market unease and steady US data have offered the dollar renewed strength at the expense of higher-yielding and risk-sensitive currencies such as sterling.
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**Macroeconomic Drivers: Data and Central Bank Divergence**
The interplay between macroeconomic fundamentals and central bank policy remains the dominant force shaping GBP/USD.
**UK Data Disappoints**
– **GDP:**
The UK economy has struggled to gain meaningful traction post-pandemic, with Q1 GDP printing at just 0.6%—below consensus and lagging peers like the US.
– **Labour market slack:**
Unemployment has ticked higher to 4.4%, and wage growth (though elevated) is starting to flatten, pointing to fading momentum in job creation.
– **Retail sales and consumer confidence:**
High living costs, sticky inflation, and subdued wage growth have dampened consumer activity. May’s retail sales data was notably soft, raising questions about the strength of consumer demand.
– **Services vs. Manufacturing:**
While the services sector has shown pockets of resilience, manufacturing remains in contraction territory—signaling unbalanced and fragile growth.
– **Inflation:**
Headline CPI eased from double digits to 2.3% year-on-year in May, yet core inflation remains stubbornly above 3%, complicating the BoE’s policy outlook.
**Bank of England: Hawkish Rhetoric Fades**
Despite ongoing inflationary pressures, the BoE has started to prepare markets for a potential policy pivot. Last week, BoE policymakers struck a more dovish tone, hinting that rate cuts are “on the table” if data warrants. Investors remain unconvinced that a rate cut will immediately follow July’s UK general election, but the message is clear: policy accommodation could be coming before year-end.
**Takeaways from BoE rhetoric:**
– The rate path is data dependent, but inflation’s convergence towards target creates room for maneuver.
– Easing signals
Read more on GBP/USD trading.