GBP/USD Weekly Outlook: Sterling Dips Amid Rising Expectations of Bank of England Rate Cuts

**GBP/USD Weekly Forecast: Sterling Weakens as Bank of England Rate Cut Expectations Grow**
*Adapted and expanded from an article by Yohay Elam on Forex Crunch*

The British Pound faced pressure against the US Dollar in the lead-up to the August 2025 Bank of England (BoE) policy meeting. The GBP/USD pair moved lower throughout the past week, reflecting growing investor sentiment that the BoE may soon begin its rate-cutting cycle. As key economic indicators continue to signal a slowdown in UK economic momentum, speculation intensifies that the central bank could reduce interest rates earlier than previously expected.

This article dives into the factors driving current price action in GBP/USD, analyzes key economic indicators, and explores what lies ahead for the currency pair over the coming week.

## GBP/USD Weekly Performance Overview

Over the past week, GBP/USD experienced a subdued tone, closing lower after a run of disappointing UK economic data. The Pound shed value amid ongoing concerns about growth and increasing evidence that inflationary pressures are diminishing. Meanwhile, the US Dollar remained relatively resilient, buoyed by hawkish messaging from Federal Reserve officials and strong US macroeconomic figures.

– Opening price (Monday): 1.2865
– Closing price (Friday): 1.2732
– Weekly range: 1.2865 – 1.2708
– Weekly change: -1.03%

The move downward was driven by softer UK GDP and services data, combined with dovish expectations around the BoE’s future rate path, even as the market remains uncertain ahead of the bank’s August interest rate decision.

## UK Macroeconomic Data Fuels Dovish Sentiment

The UK’s economic outlook has faced increasing headwinds, signaling a potential shift in policy by the BoE. Several economic indicators released last week painted a concerning picture of stagnation and weak demand growth.

### 1. UK Services PMI Disappoints

The S&P Global/CIPS UK Services PMI for July revised lower to 50.2 from its flash estimate of 51.0. This final reading was barely above the 50.0 level that separates expansion from contraction, and it highlights a slowing trajectory for the services sector, which accounts for over 75% of UK GDP.

Key takeaways from the report:

– New business volumes grew at their slowest rate since January.
– Companies reported cautious spending behavior among clients.
– Business optimism also waned slightly, indicating reduced expectations for future growth.

This soft reading indicates stagnation in the sector and supports views that tighter monetary conditions are starting to weigh on economic activity.

### 2. Retail Sales Underwhelming

Investors were also disappointed by retail sales figures, a critical component of consumer spending:

– June retail sales showed a monthly increase of just 0.1%, falling short of consensus expectations of 0.3%.
– On a yearly basis, sales volumes dropped 1.1%, the largest decline in three months.

Persistently weak consumption figures bolster the argument that high interest rates have begun crimping demand, further pressuring the BoE to consider reducing rates in order to revitalize economic growth.

### 3. Declining Inflation Expectations

Inflation in the UK has receded notably from its mid-2022 highs. Headline CPI dropped to 2.0% in June, hitting the BoE’s official target for the first time since 2021. Core inflation, though sticky, has also moderated, coming in at 3.5% year-on-year.

The reduction in inflation metrics provides the BoE with room to pivot toward monetary easing if economic data continues to underperform.

## Central Bank Divergence: BoE vs. Federal Reserve

As the market anticipates potential rate cuts from the BoE, the US Federal Reserve continues to maintain a more hawkish posture.

### Differing Policy Outlooks:

– **Bank of England**:
– Market pricing suggests a 65% probability of

Read more on USD/CAD trading.

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