Pound Edges Higher Ahead of UK GDP and US PPI Data

Key Moments

GBP/USD Firms Near 1.3500 Ahead of Data Releases

The British Pound is posting slight gains against the US Dollar in early Asian trading on Thursday, with GBP/USD hovering close to the 1.3500 mark. The move comes as the Dollar weakens following a softer US inflation reading, while market participants look ahead to a series of UK and US data releases later in the session.

Traders are focused on the preliminary estimate of UK second-quarter Gross Domestic Product and the latest US Producer Price Index figures, both due on Thursday and expected to provide fresh direction for the pair.

US Inflation Data Cools September Fed Hike Expectations

A key US inflation report released on Wednesday indicated that price pressures eased across multiple categories of goods and services, diminishing the likelihood of a rate increase by the Federal Reserve next month.

According to the Bureau of Labor Statistics, the US Consumer Price Index rose 3.4% year-on-year in July, compared with 3.5% previously. Core CPI, which strips out food and energy components, increased 2.5% year-on-year in July, down from 2.6% in June. Both figures matched market expectations.

On a monthly basis, headline CPI climbed 0.1% in July, while core CPI advanced 0.2%.

Following the data, traders further trimmed the perceived probability of a September rate hike, with the odds reduced to 40%, according to the CME FedWatch tool. Fed policymakers are set to receive the August CPI and labor market reports before they convene in September.

UK Growth Outlook and Political Warnings

UK GDP for the second quarter is in the spotlight for Sterling traders. Consensus projections point to a 0.4% quarter-on-quarter expansion in Q2, following a 0.6% increase in the first quarter. A stronger-than-expected result could underpin GBP/USD, potentially extending the current upward bias in the pair.

At the same time, concerns about the medium-term economic outlook are being highlighted at the political level. UK Prime Minister Andy Burnham warned that the UK economy could struggle to grow next year if disruption in the Strait of Hormuz persists through the end of 2026. Government sources cited internal Treasury modeling indicating that UK GDP growth could be as low as 0.3% in 2027 under such a scenario.

Scotiabank: Thursday’s UK Data Seen as Key Catalyst for GBP

Strategists at Scotiabank observed that the recent movement in GBP has unfolded against a comparatively subdued fundamental backdrop, with “fundamental releases [having] been limited.” They emphasized that investor focus is now firmly on the forthcoming UK data, noting they “continue to highlight the importance of Thursday’s data that include the preliminary (2nd) Q2 GDP figures, and monthly trade and industrial production data,” which they expect to act as the next significant driver for Pound price action.

Technical Picture: Bullish Tone Intact for GBP/USD

On the daily chart, GBP/USD retains a constructive short-term setup as it remains above the 100-day simple moving average and the 20-period middle simple moving average of the Bollinger Bands. This configuration underpins a demand area just below the current spot level.

The 14-day Relative Strength Index stands at 59.4, indicating a bullish tilt without signaling overbought conditions. This suggests that upward momentum is still in place as the pair trades toward the upper portion of its recent volatility range.

On the upside, initial resistance is located near the upper Bollinger Band around 1.3570, an area where profit-taking could emerge if the pair extends its advance. On the downside, the middle Bollinger Band near 1.3425 offers the first layer of support, followed by the 100-day simple moving average at 1.3410. A more pronounced decline would shift focus toward the lower Bollinger Band around 1.3280 as a more distant support zone.