British Pound posts modest gains to near 1.3500 ahead of UK GDP data
- GBP/USD trades with mild gains around 1.3500 in Thursday’s early Asian session.
- US CPI inflation was mild in July, cooling September Fed rate hike bets.
- Traders await the UK Q2 GDP and US PPI reports later on Thursday for fresh impetus.
The GBP/USD pair edges slightly higher to near 1.3500 during the early Asian trading hours on Thursday. The US Dollar (USD) softens against the British Pound (GBP) on a tame reading of the US inflation report. Traders will closely monitor the preliminary reading of the UK Gross Domestic Product (GDP) for the second quarter (Q2) and the US Producer Price Index (PPI) data, which are due later on Thursday.
A key inflation reading on Wednesday showed prices moderating across a range of goods and services, reducing the possibility of an interest rate hike from the US Federal Reserve (Fed) next month. The US Consumer Price Index (CPI) rose 3.4% YoY in July, versus 3.5% prior, according to the Bureau of Labor Statistics on Wednesday.
Meanwhile, the core CPI, excluding food and energy, increased 2.5% YoY in July, compared to 2.6% in June. Both readings came in line with expectations. On a monthly basis, the headline CPI and core CPI inflation rates were 0.1% and 0.2% in July.
Traders further cut the probability for a September rate hike, lowering the odds to 40%, according to the CME FedWatch tool. Fed officials will get August CPI and jobs reports before their September meeting.
The UK Q2 GDP data will take center stage later on Thursday. The UK economy is projected to grow 0.4% QoQ in Q2 after posting a strong 0.6% GDP increase in Q1. If the report shows a stronger-than-expected outcome, this could provide some support to the Cable.
UK Prime Minister Andy Burnham warned that the UK economy could barely grow next year if disruption in the Strait of Hormuz continues until the end of 2026. Internal modelling from the Treasury suggested UK GDP could see growth as low as 0.3% in 2027, government sources said.
UK data in focus as Scotiabank flags key Thursday releases for GBP
Strategists at Scotiabank note that the recent move in GBP is occurring against a relatively quiet fundamental backdrop, with “fundamental releases [having] been limited.” In their view, attention is now firmly turning to the upcoming UK numbers, as they “continue to highlight the importance of Thursday’s data that include the preliminary (2nd) Q2 GDP figures, and monthly trade and industrial production data,” which are expected to provide the next meaningful catalyst for Pound price action.
Technical Analysis: upside momentum of GBP/USD remains in place
In the daily chart, GBP/USD maintains a bullish near-term bias as it holds above the 100-day simple moving average (SMA) and the Bollinger Bands’ 20-period middle SMA, reinforcing a constructive underlying demand zone just below spot. The Relative Strength Index (14) at 59.4 is bullish-leaning without being overbought, suggesting upside momentum remains in place while price approaches the upper half of the recent volatility envelope.
On the topside, initial resistance is aligned with the Bollinger Bands’ upper band around 1.3570, where upside attempts could start to face profit-taking. On the downside, immediate support is seen at the Bollinger middle band near 1.3425, followed by the 100-day SMA at 1.3410, while a deeper pullback would look toward the lower Bollinger band around 1.3280 as a more distant structural floor.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Pound Sterling FAQs
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).
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.
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.
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.
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