GBP weekly forecast

The Pound began the week on a subdued note against most of its counterparts due to a lack of UK data releases.

Sterling rose on Wednesday following the release of the UK's latest consumer price index. The Office for National Statistics reported that headline inflation remained at the Bank of England’s 2% target, while core inflation stayed at 3.5%.

Both indices were expected to drop, which gave GBP some modest support, along with persistent services inflation. The services index stayed at 5.7%, ultimately reducing the likelihood of an August interest rate cut.

However, the Pound surrendered its gains after the release of the latest UK job data.

The Office for National Statistics reported that UK unemployment held steady at 4.4%, while average earnings (excluding bonuses) declined from 6% to 5.7%.

The drop in regular wage growth spurred renewed bets on a Bank of England interest rate cut, with the probability of a cut in August rising from 35% to 40% following the publication.

By the end of the week, the Pound stayed on the defensive as the UK's latest retail sales data revealed a larger-than-expected contraction in May, which weakened GBP exchange rates.

Looking ahead, the only key release this week for Sterling is the July PMI data. If these figures exceed forecasts, we could see support for Sterling.

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