Introduction to GBP/USD Forecast
The UK’s GDP figures are expected to be released on Thursday, and investors are eagerly waiting to see how the British economy performed in the second quarter. The preliminary estimate is forecast to show a sharp slowdown, with GDP expected to drop from 0.7% in Q1 to 0.1% in Q2. This could have a significant impact on the Pound, raising concerns about the resilience of the UK economy and potentially leading to further interest rate cuts from the Bank of England.
Expected Impact on GBP
A weak GDP reading would likely weigh heavily on the Pound, causing it to decline in value. This is because a slowdown in economic growth could lead to lower interest rates, making the Pound less attractive to investors. On the other hand, a stronger-than-expected GDP reading could help to boost the Pound, as it would suggest that the UK economy is more resilient than expected.
US Dollar Outlook
The US Dollar, on the other hand, could be affected by the latest PPI figures. A slight uptick in producer price inflation in July may help to cushion the downside stemming from Fed rate cut bets. However, another rise in US initial jobless claims could put pressure on the ‘Greenback’, causing it to decline in value. The US Dollar has been under pressure in recent days, amid growing bets on a Fed interest rate cut and concerns about the US central bank’s independence.
Daily Recap
The Pound US Dollar (GBP/USD) exchange rate climbed on Wednesday, as pressure to cut interest rates continued to mount on the Federal Reserve. At the time of writing, GBP/USD traded at $1.3564, up 0.5% on the day. The US Dollar slipped on Wednesday, amid growing bets on a Fed interest rate cut and concerns about the US central bank’s independence. The ‘Greenback’ had stumbled on Tuesday, in the wake of the US consumer price index, which showed that headline inflation held steady at 2.7% in July, rather than rising to 2.8% as expected.
Recent Developments
US President Donald Trump took to social media to renew his attacks on Fed Chair Jerome Powell, demanding an interest rate cut and saying he was ‘considering allowing a major lawsuit against Powell to proceed’. US Treasury Secretary Scott Bessent then said that he thinks the Fed should deliver a 50-basis-point rate cut in September. Following these remarks, worries about the Fed’s independence and bets on coming interest rate cuts saw USD slump as Wednesday’s European session began.
Pound Performance
The Pound was somewhat quiet on Wednesday, amid a lack of UK economic data and ahead of Thursday’s crucial GDP figures. However, Sterling was able to continue attracting some support following Tuesday’s stronger-than-expected jobs report. The latest data showed that the UK labour market is still cooling, but at a much slower pace than expected. This helped to reinforce a recent repricing of Bank of England (BoE) interest rate bets, following last week’s hawkish split among the Monetary Policy Committee (MPC).
Conclusion
In conclusion, the GBP/USD exchange rate is expected to be volatile in the coming days, as investors react to the latest GDP figures and PPI data. A weak GDP reading could weigh heavily on the Pound, while a stronger-than-expected reading could help to boost it. The US Dollar, on the other hand, could be affected by the latest PPI figures and jobless claims data. As the situation continues to unfold, investors will be closely watching the movements of the GBP/USD exchange rate, and adjusting their strategies accordingly.
