GBP/USD: Greenback weakens and BoE rate cut bets decline

GBP/USD climbed above key technical levels on Thursday.
Cable momentum is heading higher as the Greenback weakens.
Trump pick for Fed board seat brings tariff-happy policymaker to key rate-setting table.

Joshua Gibson FXStreet

GBP/USD extended recent bullish momentum on Thursday, gaining over two-thirds of one percent on the day and climbing above key technical indicators as market rebalance both a weaker US Dollar (USD) and a stronger Pound Sterling (GBP). A new Federal Reserve (Fed) Board of Governors member selected by Donald Trump is bringing protectionist policy home to the Fed, and a rate cut barely squeezed through the Bank of England’s (BoE) Monetary Policy Committee (MPC), trimming expectations of follow-up rate cuts.

United States (US) President Donald Trump has selected Stephen Miran, the current Chair of the US Council of Economic Advisors, to replace recently resigned Federal Reserve (Fed) Board of Governors (BoG) member Adriana Kugler. Miran is a pro-protectionist who championed including trade deficits in tariff calculations and will likely be friendly to President Trump’s rate cut expectations. Adding on that Trump is expected to favor Fed Board member Christopher Waller for the Fed Chair position when Jerome Powell’s term ends in 2026, and the pool of Fed voters who will support arbitrarily dropping interest rates regardless of the state of the US economy will grow substantially.

Odds of a repeat rate cut from the BoE decline after a close vote

The BoE trimmed interest rates by a quarter-point on Thursday, as markets had broadly expected. What sent Cable traders for a loop was the vote count on the MPC: BoE policymakers voted five-to-four for a 25 bps interest rate cut, a much slimmer margin than the expected seven-to-two. With MPC votes running so close to even, market expectations of a follow-up interest rate cut have withered appreciably, putting a rate hold at the BoE’s next interest rate decision in the crosshairs.

GBP/USD technical outlook

Thursday’s bullish momentum carried GBP/USD back over the 50-day Exponential Moving Average (EMA) near 1.3425, carrying Cable bids above 1.3450 and chalking in a third consecutive day of accelerating Pound gains. GBP/USD has closed higher or flat for five straight sessions, and heads into the Friday market window looking for a sixth.

GBP/USD daily chart

Pound Sterling FAQs

What is the Pound Sterling?

The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).

How do the decisions of the Bank of England impact on the Pound Sterling?

The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.

How does economic data influence the value of the Pound?

Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.

How does the Trade Balance impact the Pound?

Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.

Author

Joshua Gibson

FXStreet

Joshua joins the FXStreet team as an Economics and Finance double major from Vancouver Island University with twelve years' experience as an independent trader focusing on technical analysis.

GBP/USD ranges below 1.3450 amid US-Iran uncertainty, ahead of US data

GBP/USD keeps its range below 1.3450 in the European session on Tuesday. Uncertainty surrounding US-Iran talks drives traders toward a safe-haven currency such as the US Dollar, while undermining the risk-sensitive British Pound. All eyes remain on the US JOLTS data and Mideast headlines.

EUR/USD flatlines above 1.1500, awaits US jobs data

EUR/USD holds steady around 1.1505 in European trading hours on Tuesday. Markets remain cautious ahead of a slew of US jobs data, starting with the JOLTS Job Openings Survey later today. However, the downside appears capped by hot Eurozone inflation in July, bolstering the case for a European Central Bank rate hike at the next meeting.

Gold consolidates above $4,050 amid Fed hike bets and Iran uncertainty

Gold seesaws between tepid gains and minor losses during the Asian session as traders seem hesitant and opt to wait for further developments surrounding the Middle East crisis. The US Dollar struggles to build on the previous day's solid bounce from the lowest level since Mid-June and acts as a tailwind for the bullion. However, the uncertainty over US-Iran peace talks helps limit the downside for the buck.

Ripple and Stellar steady as derivatives data points to easing downside pressure

Ripple and Stellar show mixed price action, with XRP holding above the key $1 support zone while XLM faces rejection at $0.173. Meanwhile, improving derivatives metrics alongside fading bearish momentum suggest that the downside pressure may be easing for both altcoins. Derivatives data shows mild bullish sentiment among traders.

US JOLTs report in focus

In the US, the June JOLTs report will be in the spotlight. Job openings have increased modestly this year, which has historically predicted rising wage cost pressures ahead. June trade balance data will also be released in the afternoon and the preliminary reading pointed towards a stable trade deficit from May. The Fed's Schmid (non-voter, hawk) will be on the wires overnight.

9-3: Is the Federal Reserve’s vote tally Warsh's new forward guidance?

The rate did not move. Neither did the statement, and that’s the more interesting fact. Set the July 29 Federal Open Market Committee (FOMC) statement beside the one issued on June 17, and the two documents are identical apart from a single verb and a paragraph at the bottom naming three dissenters.