GBP/USD eases after reaching a daily high of 1.3580, as the US Dollar (USD) recovers despite weaker US consumer sentiment and persistent inflation pressures. The pair trades at 1.3556 on Friday, retreating modestly during the North American session.
Sterling retreats amid steady US inflation and soft consumer sentiment
US inflation remains above the Fed’s 2% target but under the 3% threshold, supporting expectations for the Federal Reserve to resume easing. Next week, the Fed is widely expected to cut rates by 25 basis points, with the Summary of Economic Projections (SEP) providing updated forward guidance. Deutsche Bank anticipates three rate cuts in 2025, pushing the Fed funds rate to the 3.50%-3.75% range.
US consumer sentiment fell to its lowest level since June, with the University of Michigan’s Consumer Sentiment Index declining from 58.2 to 55.4. One-year inflation expectations remained steady at 4.8%, while five-year expectations rose to 3.9% from 3.5%, reflecting lingering long-term price concerns.
UK GDP stagnates, BoE expected to hold rates
Data from the UK showed July GDP remained unchanged after 0.4% growth in June, according to the Office for National Statistics (ONS). The Bank of England (BoE) is expected to maintain the Bank Rate at 4% during next week’s monetary policy meeting, narrowing the interest rate gap with the US and supporting the British Pound’s outlook.
GBP/USD faces limited upside for now, with traders closely watching Fed and BoE signals for direction, as the dollar stabilizes and Sterling responds to domestic economic data.
