**GBP/USD Weekly Forecast: Sterling Under Pressure as BoE Rate Cut Looms**
*Original source: Yohay Elam, Forex Crunch*
The British pound is facing increasing downside risks against the US dollar, with market participants bracing for a potential interest rate cut by the Bank of England (BoE). Looking ahead to the coming week, a combination of cautious Bank of England rhetoric, resilient US economic data, and global risk sentiment is likely to drive movements in the GBP/USD currency pair.
As of early August 2025, GBP/USD continues to trade on the back foot, weighed down by weaker-than-expected UK data and the growing probability that the BoE may begin easing monetary policy as soon as the next meeting. At the same time, the US dollar remains supported by continued bullish momentum in the US economy and persistent uncertainty in global financial markets that favours safe-haven flows into the greenback.
This weekly forecast breaks down the recent fundamentals, reviews the technical analysis, and highlights the key events and economic indicators set to influence GBP/USD in the days ahead.
## UK Economic Backdrop: Weak Growth Fueling Rate Cut Expectations
The UK economy is showing signs of stagnation as economic growth disappoints, inflation cools faster than expected, and consumer confidence remains fragile. These developments are increasing the likelihood that the Bank of England will pivot toward monetary easing in its upcoming policy decisions.
Key data releases from the past week indicate softness in the UK macroeconomic outlook:
– **July Manufacturing Purchasing Managers’ Index (PMI)** printed at 48.2, below the neutral 50 level, showing contraction in the manufacturing sector.
– **GDP readings** from the Office for National Statistics revealed stagnation, with Q2 UK growth at just 0.1 percent.
– **Retail sales volumes** fell unexpectedly by 0.4 percent month-on-month in June 2025, dragged lower by weak discretionary spending.
– **Consumer inflation**: The UK’s CPI decreased to 2.1 percent y/y in June, closing in on the BoE’s 2 percent target and further reinforcing the view that inflationary pressure is receding.
With economic activity showing signs of weakness and inflation nearly in check, BoE members have softened their tone, paving the way for an end to the tightening cycle.
### Bank of England Sentiment Shifting Toward a Dovish Stance
Throughout July, BoE officials delivered dovish signals that have spurred markets to price in a potential rate cut before the end of Q3 2025. Governor Andrew Bailey, speaking at a recent monetary policy update, hinted that the central bank now sees disinflation as well-anchored and that the cost-of-living crisis appears to be easing.
Additional BoE policymakers, including Dave Ramsden and Swati Dhingra, remarked that current interest rates might be “restrictive enough” and that the central bank would assess “the need for additional hikes or cuts” based on forward-looking data.
Markets are now anticipating a **25 basis point rate cut either at the September or October policy meeting**, depending on the trajectory of inflation and employment. GBP traders are adjusting to this shifting landscape, with rate expectations translating directly into sterling weakness.
## US Economic Strength Maintains Dollar Bullishness
While the UK economy slows, the United States continues to show robust economic performance. Strong data from the US has reinforced the Federal Reserve’s higher-for-longer interest rate stance, supporting the dollar and weakening GBP/USD further.
Highlights from recent US data:
– **Q2 GDP Growth** surprised to the upside, posting a 2.6 percent annualized rate.
– **Nonfarm payrolls (NFP)** for July added 215,000 jobs, beating market estimates and indicating continued labour market strength.
– **Inflation data** remained sticky: core PCE rose 2.6 percent y/y, staying above the Fed’s 2 percent inflation target and keeping policymakers cautious.
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