- The British pound slipped to around 1.3455 against the US dollar ahead of July’s key US PCE inflation report.
- Fed Governor Waller signaled support for an interest rate cut at the September policy meeting.
- The pound has underperformed compared to other major currencies this week.
The British pound (GBP) slipped to around 1.3455 against the US dollar (USD) during Friday’s European session, easing after three straight days of gains. The GBP/USD pair retreated as the greenback edged higher ahead of the release of the US Personal Consumption Expenditures (PCE) Price Index for July, due at 12:30 GMT.
At the time of writing, the US Dollar Index (DXY), which measures the dollar against a basket of six major currencies, hovered just below 98.00. Economists expect the Fed’s preferred inflation gauge, core PCE, to rise 2.9% year-on-year in July, up from 2.8% in June, with a steady 0.3% monthly increase.
While PCE inflation remains central to shaping expectations for the Federal Reserve’s policy path, its impact could be more muted this time. Market attention has shifted toward signs of labor market weakness, following steep downward revisions to Nonfarm Payrolls (NFP) data for May and June.
On Thursday, Fed Governor Christopher Waller highlighted risks to the labor market, signaling support for a 25 basis point rate cut at the September policy meeting. “Although there are signs the labor market is weakening, I am concerned the situation may worsen further, and quite quickly,” Waller said, according to Reuters.
British Pound Poised to End the Week Weaker Than Major Peers
- The British pound underperformed other key currencies on Friday amid a light UK economic calendar, despite expectations that the Bank of England (BoE) will keep interest rates unchanged for the remainder of the year.
- This week, BoE Monetary Policy Committee (MPC) member Catherine Mann reiterated her support for maintaining rates at current levels, citing persistent inflationary pressures. “Keeping the Bank’s interest rate where it is now is appropriate, to maintain tighter monetary policy but not tighter than necessary to address persistent inflation,” Mann told Reuters.
- Looking ahead, the focus for sterling traders will be on UK Retail Sales data for July, due next week. Economists expect the report, a key gauge of consumer spending, to show moderate growth.
- Meanwhile, concerns about the US dollar’s safe-haven appeal may lend some support to GBP/USD. Market participants have grown wary as President Donald Trump continues his attacks on Fed independence, most recently by terminating Fed Governor Lisa Cook over mortgage-related allegations. Cook has filed a lawsuit disputing the claims, with a court hearing scheduled for Friday at 14:00 GMT.
- Trump has a history of pressuring the Fed, at times threatening Chairman Jerome Powell with dismissal if rates were not lowered. However, he struck a different tone after Powell’s speech at the Jackson Hole Conference on Friday, praising him for unexpectedly delivering a moderate rate guidance.
Technical Analysis: GBP/USD Signals Bullish Reversal with Inverted Head and Shoulders Pattern
The British pound slipped to around 1.3470 against the US dollar on Friday, with GBP/USD continuing to trade sideways near the 20-day Exponential Moving Average (EMA) at 1.3468.
On the daily chart, the pair is shaping an inverted Head and Shoulders (H&S) pattern, a formation that typically signals a potential bullish reversal following a corrective or bearish phase. The neckline of this setup lies near 1.3580.
Meanwhile, the 14-period Relative Strength Index (RSI) remains range-bound between 40.00 and 60.00, reflecting ongoing consolidation and reduced momentum.
Key support rests at the August 11 low of 1.3400, while resistance is seen at the July 1 high near 1.3790, which stands as the major upside barrier.
