UK FX Outlook: GBP Holds Steady Ahead of Crucial GDP Report

The British Pound (GBP) is maintaining a stable position against the US Dollar (USD) on Thursday, with the exchange rate hovering around 1.3535, despite experiencing heightened volatility following the release of US inflation data.

Market participants are now shifting their focus to the upcoming UK Gross Domestic Product (GDP) figures for July, scheduled for release on Friday at 06:00 GMT.

The GDP report is anticipated to provide fresh insights into the nation's economic landscape and could potentially serve as a pivotal moment in shaping market perceptions regarding the Bank of England's (BoE) monetary policy stance and the economic agenda of UK Prime Minister Sir Keir Starmer's administration.

Analysts generally expect monthly growth to remain flat, following an unexpected 0.4% uptick in June.

The GBP's performance in the foreign exchange market will be significantly influenced by the economic signals conveyed through this data release.

Key Macroeconomic Factors Impacting the GBP

The UK's economic growth trajectory has been under close scrutiny for several consecutive quarters. Following a respectable 0.3% expansion in the second quarter, albeit slower than the 0.7% growth recorded in the first quarter, projections for July remain conservative.

Chris Williamson, Chief Economist at S&P Global, remarks, "Anticipating another monthly surge in GDP after June's unexpected result would be overly optimistic." However, he notes that recent Purchasing Managers Index (PMI) data still indicates growth at its highest level in a year.

James Smith, an economist at a prominent financial institution, observes that "the second-quarter growth was bolstered by anticipation of US tariffs and tax adjustments. These effects are not expected to persist."

Consequently, Friday's GDP figures are viewed as critical, particularly as the British economy appears to be grappling with what the British Chambers of Commerce (BCC) describes as a "low-growth predicament."

Although growth projections for 2025 have been revised upward to 1.3% from 1.1%, they remain subdued. Business investment, already constrained by increases in social security contributions, has been adjusted downward to 1.6% for 2025 from the previous estimate of 4.8%. Additionally, export prospects are hampered by ongoing trade tensions, notably with the United States and the European Union.

Against this backdrop, the Bank of England implemented a reduction in a key interest rate to 4% in August, with only two further cuts planned between now and the conclusion of 2026.

This cautious stance is justified by persistent inflationary pressures, with the Consumer Price Index (CPI) projected to peak at 3.7% this year, according to BCC forecasts, before gradually decelerating. This monetary prudence could, however, potentially bolster the Pound if the GDP figures prove robust.

Technical Analysis of GBP/USD: Confirmation of Rebound Sought

The GBP/USD pair experienced an uptick on Thursday, buoyed by a weakening US Dollar following the release of inflation data.

This bullish momentum resulted in a breakout from a flag pattern, a chart formation suggesting potential further upside in the near term.

However, the Cable is approaching a significant resistance level around 1.3590, which has consistently thwarted bullish attempts since July. A breach of this threshold is therefore essential before any substantial upward movement can be anticipated.

Conversely, a reintegration into the flag pattern below 1.3540 could pave the way for a more pronounced pullback towards the flag's lower boundary at 1.3500 and the 100 Simple Moving Average (SMA) on the 4-hour chart, currently situated at 1.3484.

Current Pound Sterling Exchange Rates

The table below illustrates the percentage changes of the British Pound (GBP) against major currencies today. The British Pound demonstrated the strongest performance against the US Dollar.

|Base/Quote|USD|EUR|GBP|JPY|CAD|AUD|NZD|CHF| |----------|---|---|---|---|---|---|---|---| |USD|-0.34%|-0.12%|0.10%|-0.01%|-0.16%|-0.17%|-0.27%| |EUR|0.34%|0.20%|0.31%|0.33%|0.15%|0.20%|0.02%| |GBP|0.12%|-0.20%|0.10%|0.11%|-0.11%|0.00%|-0.17%| |JPY|-0.10%|-0.31%|-0.10%|-0.04%|-0.22%|-0.12%|-0.29%| |CAD|0.00%|-0.33%|-0.11%|0.04%|-0.28%|-0.14%|-0.26%| |AUD|0.16%|-0.15%|0.11%|0.22%|0.28%|0.05%|-0.09%| |NZD|0.17%|-0.20%|-0.00%|0.12%|0.14%|-0.05%|-0.19%| |CHF|0.27%|-0.02%|0.17%|0.29%|0.26%|0.09%|0.19%|

The table displays percentage changes of major currencies relative to each other. To interpret the data, select a base currency from the left column and follow the horizontal line to the desired quote currency in the top row. The percentage change shown in the corresponding cell represents the relative value of the base currency against the quote currency.

Disclaimer: This information is provided for educational purposes only. Historical performance should not be considered indicative of future results.