– Written by


James Fuller

STORY LINK Pound to Dollar Forecast: GBP Tests 1.34 as Mixed US Economic Data Clouds Fed Outlook

The Pound to Dollar exchange rate (GBP/USD) rebounded towards the 1.3400 level after a mixed batch of US economic data failed to extend the US Dollar’s recent gains.

Headline US retail sales rose 0.2% in June, matching expectations, while the closely watched control group increased a stronger-than-expected 0.5%, pointing to resilient underlying consumer demand. However, core retail sales excluding autos unexpectedly fell 0.2%, tempering enthusiasm for the Dollar despite a further decline in weekly jobless claims that reinforced the strength of the US labour market.

Investors continue to weigh evidence of resilient US economic activity against signs that consumer spending is becoming more selective, while expectations for Federal Reserve policy and developments in the Middle East remain key drivers of Dollar sentiment.

GBP/USD Forecasts: Unable to Make Headway

The Pound to Dollar (GBP/USD) exchange rate has continued to trade around 1.3400 and is currently trading just below this level with no attempt to break key resistance.

Scotiabank noted; “the GBP’s recovery from its June 24 low (~1.3150) looks to have stalled over the past week or so, with apparent resistance above 1.3400.”

It added; “We see dense resistance ahead of 1.3500, and we look to a near-term range bound between 1.3350 and 1.3450.”

ING has a 3-month GBP/USD target of 1.31 as the dollar makes headway.

Following today’s retail sales report, markets remain divided over whether resilient consumer demand will be enough to keep the Federal Reserve on a hawkish path, particularly after softer CPI and PPI inflation data earlier this week.

ING commented; “While soft US CPI data has taken the sting out of the dollar’s upside, it is probably too early to look for a much lower dollar just yet.”

According to MUFG; “Despite the muted FX reaction, the scale of weakness in the CPI report certainly helps weaken the key pillar of support for the dollar – the prospect of a near-term hike. That can open up scope for further dollar depreciation. However, it is difficult to trade with conviction given the re-escalation in the conflict in the Middle East and the 13% surge in crude oil prices this week.”

In testimony to the House Financial Services Committee on Tuesday, new Fed Chair Warsh maintained a generally hawkish stance.

He stated that the central bank has “no tolerance” for persistently elevated inflation, and vowed to “do my job” if challenged by U.S. President Donald Trump.

He also stated that he is committed to the dual mandate of 2% inflation and maximum employment.

MUFG commented; “The testimony from Fed Chair Warsh looks to have curtailed the move weaker for the dollar. Just like following his first FOMC meeting, Warsh spoke with conviction in relation to the Fed achieving its 2% inflation goal. The CPI print was not “mission accomplished” and he wasn’t going to “cherry pick” data.

The bank added; “We don’t really view this as “hawkish” given he is merely promising to focus on what is the legal mandate of the Federal Reserve. However, he again is emphasising his inflation fighting credentials.”

According to Scotiabank; “We remain of the view that Fed tightening risks this year are mispriced and soft CPI data this morning (plus the soft NFP report for June) may act to curb some of the market’s enthusiasm for rate hikes.”

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TAGS: Pound Dollar Forecasts

U.S. Dollar Index gains ground as traders react to the Retail Sales report. The report indicated that Retail Sales increased by +0.2% month-over-month in June, in line with analyst estimates. Retail Sales Ex Autos declined by -0.2%, compared to analyst forecast of -0.1%.

Today, traders also had a chance to take a look at the Initial Jobless Claims report. The report indicated that 208,000 Americans filed for unemployment benefits in a week, compared to analyst consensus of 217.000. The report showed that labor market remained in decent shape, which was bullish for the U.S. dollar.

The Euro to Dollar exchange rate is trading close to 1.1460 after gaining around 0.5% in July, although Rabobank expects choppy conditions to dominate over the coming months.

The bank notes that the US Dollar has been the strongest G10 currency since the start of the Iran war, initially benefiting from safe-haven demand and short-covering before receiving a second boost from more hawkish Federal Reserve expectations.

Rabobank believes investors may still have room to increase long-Dollar positions, but recent price action suggests that the rally is losing momentum.

The bank highlights that the Dollar has failed to respond meaningfully to renewed speculation over a possible Federal Reserve rate increase, despite concerns about sticky core inflation, tariff pressures and AI-related demand.

According to Rabobank, this “supports the view that the market is already long USDs and currently has little appetite to build these up further.”

The bank does not share the market’s hawkish outlook for the Fed, but it also sees limited scope for investors to rebuild large bullish positions in the Euro.

Optimism surrounding Germany’s fiscal expansion has faded, while higher energy costs and weaker Eurozone growth have undermined sentiment. Expectations for another European Central Bank rate increase are also largely reflected in current pricing.

Rabobank expects “choppy range trading around the EUR/USD1.14 level on a 1-to-3-month view”, with similarly uneven trading likely to persist into the autumn.

Copper price continued forming bullish trading, as the negative pressure repeated at $6.3000, attempting to find a chance for recording extra gains in the near period, and the price needs to provide a new close above the current barrier, to reinforce the chances of forming a new bullish rally, to expect reaching $6.4800 followed by $6.5400.

Note that the main indicators will support the bullish scenario in the current trading, to keep waiting for recording the previously suggested expected gains, while the risk of the price return to the bearish corrective trend requires a sharp decline, to settle below $5.9500 level.

The expected trading range for today is between $6.2500 and $4.4800

Trend forecast: Bullish

The GBPJPY pair formed a new bullish rally yesterday, benefiting from the continuation of providing positive momentum by the main indicators, to surpass %38.2 Fibonacci correction level at 218.55, which formed the main target in the previous report, to open the way for recording extra gains by reaching 219.30 level.

We will depend on forming extra support at 218.55 level, to reinforce the chances of forming new bullish waves, targeting the bullish channel’s resistance at 220.00, and surpassing it will form the next main target at 220.45 level in the current trading.

The expected trading range for today is between 218.80 and 220.00

Trend forecast: Bullish

jumps to a two-month high on Chancellor reports and softer Fed outlook. Oil steadies near $80 as U.S.-Iran hostilities remain in focus.

GBP/USD Jumps to Two-Month High on Chancellor Reports and Softer Fed Outlook

GBP/USD has climbed to a two-month high above 1.35 as investors continue to scale back Federal Reserve expectations and welcome reports over the UK’s next Chancellor.

Reports that Home Secretary Shabana Mahmood will be appointed Chancellor by incoming Prime Minister Andy Burnham have helped to reassure the market and ease concerns. The market had been fretting that Burnham could appoint a more fiscally expansionary candidate, such as Ed Miliband. are edging lower on the news.

Meanwhile, UK data showed the economy returned to growth in May after contracting in April. rose 0.1% month-on-month, beating expectations for no growth following April’s 0.1% decline.

Looking beneath the headline, the services sector, which accounts for around 80% of the UK economy, expanded 0.3%. However, construction output fell 0.8%, while industrial production declined 0.5%, suggesting the recovery remains uneven.

Looking ahead, renewed tensions in the Middle East could cloud the outlook for the economy. Oil prices have risen to a monthly high, weighing on the economic outlook while increasing the risk of higher inflation

Higher oil prices are reinforcing expectations that the Bank of England will tighten monetary policy later this year. Markets are now fully pricing in a 25 basis point rate hike in November, with another increase expected in March 2027.

Meanwhile, the U.S. dollar has fallen to a monthly low after softer-than-expected and data this week, which followed last week’s weaker labour market report. Together, the data have prompted investors to rule out a July rate hike from the Federal Reserve.

Markets now price around a 70% probability of a 25 basis point rate hike in September.

However, downside in the dollar could prove limited. Renewed U.S.-Iran hostilities could support safe-haven demand for the greenback, while rising oil prices risk reigniting inflation concerns and lifting .

Attention now turns to today’s U.S. report, which is expected to show sales rose 0.2% month-on-month in June after 0.9% growth previously. A stronger-than-expected reading could lend support to the dollar.

GBP/USD Forecast – Technical Analysis

GBP/USD has recovered from the 1.3200 support zone, breaking above both the 200-day SMA and the multi-month falling trendline to reach a high of 1.3550.

The breakout, together with the RSI holding above 50, keeps the near-term technical outlook constructive.

Buyers will look to extend gains towards 1.3600, followed by 1.3650, the May high. A move above there would bring 1.3800 into focus.

Initial support is seen around 1.3500, where the former trendline resistance has become support. A break below this level would expose the 200-day SMA near 1.3400, followed by horizontal support at 1.3340. Below there, sellers could target the 1.3200 support zone.

Oil Steadies Near $80 as U.S.-Iran Hostilities Remain in Focus

Oil prices are holding near a monthly high, with WTI trading around $80 per barrel, as renewed tensions between the U.S. and Iran continue to underpin the market.

The U.S. reimposed a naval blockade on Iranian ports earlier this week, while Tehran has threatened to disrupt more regional energy exports as tensions between the two sides continue to escalate.

Although geopolitical risks remain supportive of , the market has paused after the sharp rally earlier this week.

Shipping through the Strait of Hormuz remains well below normal levels, with just seven vessels transiting the waterway on Wednesday, down from 13 a day earlier.

At the same time, mediation efforts by neighbouring countries continue. The fact that oil prices have stabilised around current levels suggests investors are not yet pricing in a full-scale regional conflict.

However, a geopolitical risk premium remains firmly embedded in the market. Any signs that Iran could use its Houthi allies in Yemen to disrupt shipping through the Bab el-Mandeb Strait would likely add further upward pressure to oil prices.

Looking further ahead, oil prices could remain elevated into the fourth quarter if export flows continue to recover only slowly, particularly with global inventories already depleted following substantial drawdowns during the second quarter.

Conversely, a sustained easing in tensions alongside a faster recovery in production could see crude prices move back towards the $60 area by year-end.

Oil Forecast – Technical Analysis

After breaking below its symmetrical triangle pattern and the 200-day SMA, oil found support around $67 before staging a strong recovery.

The price has now reclaimed the 200-day SMA and is testing key resistance around $80, where the psychological level coincides with the April low and the 61.8% Fibonacci retracement of the move from $55 to $120.

With the RSI above 50, buyers will look for a break above $80, which would expose $88, where the 50-day SMA, the falling trendline resistance and the 50% Fibonacci retracement converge. Above there, $95 comes into focus.

Failure to overcome the 50-day SMA could see support tested around the 200-day SMA at $74.40. A break below there would shift attention back towards the $67-$70 support zone.

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