GBP/USD Price Forecast: Struggles to return above 20-day EMA

GBP/USD edges higher to near 1.3387 amid a slight weakness in the US Dollar.
UK headline inflation cooled down to 2.6% YoY in June.
Investors await the UK Retail Sales and the flash private sector PMI data.

The British Pound (GBP) trades marginally higher to near 1.3387 against the US Dollar (USD) during the European trading session on Thursday. The GBP/USD pair edges higher as the US Dollar drops despite surging oil prices in the wake of escalating Middle East energy supply risks.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

At press time, the US Dollar Index (DXY), which gauges the Greenback’s value against six major currencies, trades 0.15% lower to near 101.00.

On the domestic front, investors await the Federal Reserve’s (Fed) monetary policy announcement next week, in which it is expected to leave interest rates unchanged.

Meanwhile, the British Pound demonstrates a broader mixed performance while fears of Bank of England (BoE) interest rate hikes have eased. Traders doubt the BoE will tighten monetary conditions in the near term as the United Kingdom (UK) headline Consumer Price Index (CPI) growth has cooled down to 2.6% Year-on-Year (YoY) in June from the previous reading of 2.8%.

BoE seen on extended hold before gradual easing to neutral in 2027

Economists at Societe Generale reiterate that their “baseline forecast remains that the BoE will keep Bank Rate on hold at 3.75% throughout 2026,” reflecting a view that policymakers will need prolonged time to consolidate the disinflation trend. They add that “by early 2027, we expect the MPC to gain confidence that inflation will return sustainably to the 2% target over the medium term, allowing for cumulative rate cuts of 75bp in 2027,” which would “bring Bank Rate to our estimate of its neutral level of 3%.”

Going forward, investors will focus on the UK Retail Sales for June and the preliminary S&P Global PMI data for July, which will be released on Friday.

GBP/USD technical analysis

GBP/USD trades slightly higher at around 1.3387 at press time. The pair corrects to near the 20-day exponential moving average (EMA), which is at 1.3385, after correcting from the downward-sloping border of the Descending Triangle pattern at 1.3540, suggesting that the near-term outlook has become uncertain.

The Relative Strength Index (14) at 50.73 sits near neutral, hinting that recent buying pressure is stabilizing rather than driving a decisive breakout, leaving the near-term bias slightly constructive but still capped by overhead trend resistance.

On the topside, initial resistance is located at the downward-sloping trend-line region near 1.3501, followed by the July 15 high at 1.3558. On the downside, the July 8 low at 1.3322 is the immediate support zone, with a more notable cushion at the June 24 low at 1.3140.

(The technical analysis of this story was written with the help of an AI tool. Know more.)

Economic Indicator

Consumer Price Index (YoY)

The United Kingdom (UK) Consumer Price Index (CPI), released by the Office for National Statistics on a monthly basis, is a measure of consumer price inflation – the rate at which the prices of goods and services bought by households rise or fall – produced to international standards. It is the inflation measure used in the government’s target. The YoY reading compares prices in the reference month to a year earlier. Generally, a high reading is seen as bullish for the Pound Sterling (GBP), while a low reading is seen as bearish.

Why it matters to traders?

The Bank of England is tasked with keeping inflation, as measured by the headline Consumer Price Index (CPI) at around 2%, giving the monthly release its importance. An increase in inflation implies a quicker and sooner increase of interest rates or the reduction of bond-buying by the BOE, which means squeezing the supply of pounds. Conversely, a drop in the pace of price rises indicates looser monetary policy. A higher-than-expected result tends to be GBP bullish.

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