**GBP/USD Weekly Forecast: Pound Under Pressure Ahead of Potential BoE Rate Cut**
*Adapted and expanded from the original article by Yohay Elam on Forex Crunch (August 2, 2025). Additional insights and context from publicly available financial sources.*
The British pound (GBP) has come under renewed selling pressure against the US dollar (USD) as markets increasingly expect the Bank of England (BoE) to cut interest rates in the near term. With macroeconomic indicators pointing to a softening UK economy, and recent rhetoric from BoE policymakers suggesting a pivot toward policy easing, GBP/USD has experienced a sustained downward trend.
In the first week of August 2025, sterling faced headwinds after weaker-than-expected UK economic data confirmed fears of stagnating growth. Combined with signals from the Federal Reserve indicating a “higher-for-longer” stance on interest rates, the divergence in monetary policy paths between the BoE and the Fed is proving to be a major driver behind GBP’s weakness.
This article provides a comprehensive outlook for GBP/USD for the upcoming week based on economic data, central bank expectations, and technical factors.
## Highlights of the Week
– Pound fell below 1.2750 as BoE signals a dovish shift
– Inflationary pressures in the UK continue to moderate
– UK GDP and services data suggest economic deceleration
– US economic data remains resilient, underpinning dollar strength
– Increasing probability of a BoE rate cut in September or November
## UK Economic Outlook Softens
The Bank of England remains caught between concerns over fragile domestic growth and easing but still-elevated inflation. In recent weeks, top officials from the BoE, including Governor Andrew Bailey, have acknowledged a cooling labor market and a notable moderation in price pressures.
### Relevant UK Data This Week:
– **Manufacturing PMI (July):** Printed at 47.8, missing expectations for a modest uptick. Continued contraction points to sluggish industrial activity.
– **Services PMI (July):** Fell to 50.5, suggesting the largest sector of the UK economy is teetering on the edge of contraction.
– **Consumer Credit:** Dropped to £0.9 billion in June, suggesting consumers are pulling back amid rising living costs and uncertainties.
These lackluster indicators have added to a growing narrative that the BoE could soon abandon its cautious policy stance and move toward interest rate reductions.
## Bank of England Policy Shift Incoming?
Markets are increasingly pricing in a more dovish BoE. Earlier in 2025, the BoE raised interest rates to 5.50%, aiming to tackle persistent inflation stemming from post-COVID supply chain shocks and energy price surges. However, with CPI more recently trending lower, many analysts now believe that monetary policy is too restrictive for the softening economy.
### BoE Rate Cut Possibilities:
– **September Rate Cut?** Implied probabilities from interest rate futures suggest nearly a 50% chance the BoE will lower rates by 25 basis points in September.
– **November More Likely:** If upcoming inflation prints remain tame, the MPC may wait until November to ensure data confirms a downtrend.
– **Policymaker Tone:** BoE Chief Economist Huw Pill recently indicated that policy is “sufficiently restrictive” and hinted that rate cuts could come sooner without sparking a rebound in inflation.
The dovish pivot is in contrast to the US Federal Reserve, which is keeping financial conditions tight and pushing back against expectations for imminent rate cuts. The result is growing policy divergence that favors the USD over the GBP.
## US Dollar Remains Firm
The US dollar has remained well-supported as the US economy proves remarkably resilient in the face of high interest rates. This is giving the Federal Reserve confidence to maintain current policy levels for longer than previously anticipated.
### Key Factors Supporting the USD:
– **GDP Growth:** US Q2 GDP expanded by 2.4% annually, ahead of estimates
Read more on USD/CAD trading.