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GBP/USD Holds Above Key Support Before Data Likely to Shape BoE Path
Economic
Summary:
The Pound Sterling outperformed peers on Wednesday ahead of crucial UK Q2 GDP data, with markets bracing for a sharp slowdown in growth that could complicate the Bank of England’s fight against inflation.
Buy
CLOSEDGBPUSD
End Time
1.35600
Entry Price
1.37500
TP
1.34000
SL
1.34899 -0.00216 -0.16%
1600
Points
Loss
1.34000
SL
1.33997
CLOSING
1.35600
Entry Price
1.37500
TP
The British pound traded stronger against its major peers on Wednesday, with investors positioning cautiously ahead of Thursday’s release of preliminary second-quarter GDP figures for the United Kingdom. The data could prove pivotal for both currency markets and the Bank of England’s policy outlook, as it arrives at a moment when growth momentum is faltering but inflation risks remain stubbornly elevated.
Economists expect the UK economy to have expanded by just 0.1% in Q2, a dramatic slowdown from the 0.7% quarterly growth recorded in the first three months of the year. On an annualised basis, growth is forecast to ease to 1%, undershooting the BoE’s latest projection of 1.25% announced at its policy meeting last week. In Q1, the economy grew by 1.3% year-on-year, underscoring the pace of deceleration.
If the GDP data confirms this cooling trend, the central bank will find itself in an increasingly uncomfortable position: monetary policy remains tight to rein in price pressures, yet restrictive conditions risk stifling already fragile growth. Last week, policymakers upgraded their one-year forward CPI forecast to 2.7% from 2.4%, signalling that inflation could remain above target for longer than previously anticipated.
“Markets are increasingly focused on the BoE’s balancing act,” said one London-based FX strategist. “They’ve got a growth engine that’s sputtering but still have inflation in the rear-view mirror. If Thursday’s data disappoints, it will amplify speculation about an earlier policy pivot.”
The slowdown in activity comes alongside early signs of weakness in the UK labour market, a development that could further complicate the BoE’s policy calculus. The latest labour market report revealed a 44,000 drop in job vacancies in the May-to-July period, bringing the total down to 718,000. Moreover, preliminary estimates show 8,000 fewer payrolled employees in July compared with June.
Survey feedback suggests that some firms are adopting a more cautious stance, refraining from hiring new staff or replacing those who leave. This shift may be linked to higher employer contributions to social security schemes, which have raised hiring costs. A slower job market could eventually cool wage growth — a key driver of service-sector inflation — but it also risks dragging down consumer demand at a time when the economy is already losing steam.
Technical Analysis
From a market structure perspective, GBP/USD saw an intraday pullback on Wednesday, giving back some of its recent gains as traders booked profits ahead of the GDP release. The move appears corrective in nature, allowing the pair to consolidate after an overextended rally that had pushed relative strength index (RSI) readings into overbought territory.
Despite the dip, the pair remains firmly above the 1.3500 level — a zone that now acts as immediate support after being breached earlier in the week. This retention above resistance-turned-support is often viewed as a bullish confirmation signal. Short-term price action continues to trace a corrective upward channel, with momentum indicators suggesting that the underlying bullish bias remains intact so long as price action holds above the key trendline support.
However,a softer-than-expected GDP print could test Sterling’s resilience and trigger a retest of the 1.3400 area, while an upside surprise could ignite another leg higher toward the 1.3700–1.3750 resistance zone.
TRADE RECOMMENDATION
BUY GBPUSD
ENTRY PRICE: 1.3560
STOP LOSS: 1.3400
TAKE PROFIT: 1.3750
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