Pound Steps Back to Take Two Steps Forward. Forecast as of 19.06.2025
Corrections are often met with panic. However, if you use them as an opportunity to buy at a lower price, you can generate profit. The Bank of England meeting is driving volatility in the GBPUSD rate, as it could signal a rate cut. Let’s discuss this topic and make a trading plan.
The article covers the following subjects:
Major Takeaways
- The weakness of the British economy is putting pressure on the pound.
- The Bank of England may adopt a dovish rhetoric.
- De-escalation of the conflict in the Middle East will help the pound sterling.
- Long trades can be opened if the GBPUSD pair returns above 1.3475.
Weekly Fundamental Forecast for Pound Sterling
Will the British pound prove to be a formidable currency with inherent vulnerabilities? Following the British economy’s robust performance at the beginning of the year and a trade agreement with the US, the outlook for GBPUSD appeared rather bullish. The pair reached its highest level since 2022 amid the fastest inflation in developed countries, which should have prevented the Bank of England from cutting rates. However, as fresh data emerges, the situation may change dramatically.
The derivatives market is now reevaluating its views in light of the slowest job growth since the pandemic, the most severe GDP contraction in April in the last 18 months, and a record decline in British exports to the US. The market anticipates two rate cuts before the end of the year and estimates a 75% probability of a significant reduction in the repo rate from 4.25% to 4% in August. Investors project that the rate will be trimmed to 3.5% by the summer of 2026.
Market Expectations on BoE Interest Rate
Source: Bloomberg.
According to a survey conducted by Bloomberg, all 43 experts predict that borrowing costs will remain at 4.25% in June. However, two or three of the nine MPC members will likely vote in favor of a rate cut. In May, the inflation rate rose to 3.4%, which is notably higher than that of the US and the eurozone. However, this is not a concern. The Bank of England views the recent increase in consumer prices as temporary and anticipates a slowdown by the end of the year. According to the central bank, wage growth is expected to decline from the current rate of over 5% to 3.75%.
UK Inflation Rate
Source: Bloomberg.
According to MUFG, speculation regarding the Bank of England’s potential dovish signals adversely impacts the pound’s value. However, the June MPC meeting is unlikely to reverse the upward trend in the GBPUSD pair. The pound sterling maintains its position as one of the highest-yielding G10 currencies, a factor greatly influenced by the current high global risk appetite.
In addition, UK inflation may accelerate due to rising oil prices amid the Israeli-Iranian conflict, providing investors with an opportunity to benefit from a ‘buy-the-dip’ strategy. The Bank of England’s dovish rhetoric will create ideal conditions for purchasing the pound at a lower price.
A potential correction in US stock indices could dampen global risk appetite, creating headwinds for the UK currency. In addition, if the US engages in an armed conflict in the Middle East, Iran may capitulate, which could lead to a decline in Brent and WTI prices. However, in both cases, the US dollar appears to be the victim.
Weekly GBPUSD Trading Plan
Therefore, there is no cause for concern regarding the GBPUSD pullback. Instead of viewing these challenges as obstacles, it is more beneficial to consider them as a valuable opportunity. Therefore, long positions can be opened if bears fail to break through the support level of 1.339 or if the pair returns above 1.3475.
This forecast is based on the analysis of fundamental factors, including official statements from financial institutions and regulators, various geopolitical and economic developments, and statistical data. Historical market data are also considered.
Price chart of GBPUSD in real time mode
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