Sterling Slips as UK Contraction Fuels Rate‑Cut Bets; Dollar Weakness Offers Limited Relief

The pound faces fresh headwinds after the UK GDP shrank for a second consecutive month in May (–0.1%), amplifying speculation the Bank of England could lower rates as soon as August, now ~78% priced in by markets. Mounting fiscal strains, including policy reversals and a widening deficit, further pressure sterling’s outlook.

Across the Atlantic, the dollar continues to drift lower, weighed by trade tariff uncertainty and deepening fiscal worries. However, analysts warn that renewed trade tensions could briefly bolster safe-haven USD demand, limiting sterling’s upside potential.

Technically, GBPUSD trades near 1.3530–1.3550, with key resistance around 1.3600 and support in the 1.3450–1.3500 zone. Momentum tilts bearish: a decisive break below 1.3450 risks deeper losses toward 1.3350, while further dollar softness might trigger a rebound above 1.3600.

In the near term, traders eye upcoming UK data and U.S. releases as pivotal catalysts, with shifting BoE expectations and trade developments likely to shape the next move.

GBPUSD D1 Timeframe

Earlier this week, I wrote about my bearish expectations on GBPUSD pending its reaching the highlighted drop-base-rally demand zone. The demand zone, as mentioned, remains the critical area of interest, while the support trendline and the SBR (Sweep-Break-Retest) pattern serve as confluences for the bullish sentiment. If price closes this week within close proximity to the demand zone, we can expect the bullish reversal to kick off early next week since the US CPI comes up on Tuesday.

GBPUSD - H4 Timeframe

The 4-hour timeframe chart of GBPUSD provides further details; showing the SBR pattern, and the key Fibonacci retracement levels to consider for a potential bullish entry.

Direction: Bullish

Target- 1.37060

Invalidation- 1.33353

CONCLUSION

You can access more trade ideas and prompt market updates on the Telegram channel.