**GBP/USD Holds Steady Amid Cautious Dollar Sentiment and UK Economic Data**
*By Mitrade News Team | Edited and expanded for SEO and clarity*
*Original Source: Mitrade (https://www.mitrade.com/au/insights/news/live-news/article-1-1049205-20250819)*
The British Pound (GBP) is holding steady against the US Dollar (USD), reflecting a pause in directional momentum as traders weigh the balance between the Federal Reserve’s future policy path and a mixed economic outlook in the UK. The GBP/USD currency pair trades in a narrow band following recent developments in both the US and UK economic landscapes, awaiting fresh catalysts to break out in either direction.
This article explores the current developments influencing GBP/USD, including recent economic indicators, central bank policy expectations, market sentiment, and key technical levels.
## Economic Landscape: United Kingdom
### UK Inflation Slows Moderately
– The UK’s annual Consumer Price Index (CPI) for July slowed to 6.8 percent from 7.9 percent in June, in line with market expectations.
– The core CPI, which excludes volatile components like food and energy, remained stubborn at 6.9 percent, unchanged from the prior reading, signaling persistent underlying inflation.
– Services inflation, a key gauge monitored by the Bank of England (BoE), also stayed elevated, reinforcing concerns about long-term inflation pressures.
This inflation report presented a mixed bag: while headline inflation eased, the BoE is likely to remain cautious amid persistently high core and services inflation, signaling further tightening may still be warranted.
### UK Labor Market Remains Tight
– The UK’s unemployment rate edged up slightly to 4.2 percent in the three months to June from 4.0 percent previously.
– Wage growth, however, accelerated to a record 7.8 percent annual increase in the same period, highlighting ongoing labor market strength and inflationary risk from services wages.
– Private sector wage growth surprised to the upside, keeping a floor under inflationary expectations.
The BoE is closely watching wages as a crucial metric. The sustained wage momentum adds to arguments for further interest rate hikes, despite signs of economic softening elsewhere.
## Bank of England’s Monetary Policy Outlook
The Bank of England hiked interest rates by 25 basis points in its August meeting, lifting the base rate to 5.25 percent—the highest level since 2008. Market participants are speculating whether the peak rate is nearing or if more tightening may be necessary.
Key considerations for the BoE:
– Inflation remains well above the 2 percent target.
– Core and services inflation have not eased meaningfully.
– Wage growth continues to show strength.
– Economic activity is showing signs of cooling.
BoE Governor Andrew Bailey and other policymakers have taken a data-dependent stance, signaling that future rate decisions will rely heavily on upcoming inflation and wage data. Markets currently price in a terminal rate between 5.5 and 5.75 percent before rates potentially plateau.
## Economic Landscape: United States
### US Inflation Shows Signs of Cooling
– July’s US CPI rose 3.2 percent year-over-year, up from June’s 3 percent but slightly below expectations of 3.3 percent.
– Core CPI eased to 4.7 percent year-over-year, the lowest since October 2021.
– Monthly inflation came in at 0.2 percent for both headline and core metrics, suggesting moderated price pressures.
This cooling inflation trend reinforces the market belief that the Federal Reserve may be nearing the end of its rate-hike cycle.
### US Labor Market Growth Slows Gradually
– July’s Non-Farm Payrolls (NFP) showed an addition of 187,000 jobs, slightly below expectations.
– Wage growth remained steady, and the unemployment rate edged slightly lower to 3.5 percent from 3.6 percent.
– Initial jobless claims remained near multi-month highs at over
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