GBP/USD outlook: Currency Pair of the Week, September 15, 2025

The GBP/USD is our currency pair of the week for obvious reasons: we have both the Fed and BoE rate decisions to come, while the UK macro calendar is also a busy one this week. Ahead of these events, I will maintain my bullish GBP/USD outlook. This is because US-UK interest rate differentials are likely to narrow to zero in the next couple of months, with the Fed seen cutting rates while the BoE may now hold off until December.

 

GBP/USD outlook: Sterling faces data test ahead of BoE

 

Sterling traders face a lively week. Tomorrow’s jobs and earnings data, followed by Wednesday’s August CPI release, will set the stage for Thursday’s Bank of England meeting. Unless we see a sharp drop in employment or a surprise easing in wages or services inflation, the BoE is likely to stick to the hawkish message it delivered at its August MPC meeting. That view is supported by market pricing, with less than 10 basis points of cuts priced in for this year, which will be influenced by incoming data.

 

The UK’s inflation picture remains notably different from the eurozone and the US, and it is now arguably the key driver of BoE policy, outweighing everything else. Headline CPI is expected to have remained unchanged at 3.8% in August with core CPI seen easing only a tad to 3.7%. Average earnings, on the other hand, are expected to have risen to 4.7% in the three months to July from 4.6% in the prior three month average. During this period, the unemployment rate is expected to have remained unchanged at 4.7% for the third month in a row.

 

Meanwhile, political turbulence in the UK has also done little to dent demand for the higher-yielding pound. With the FTSE also holding near all-time highs, investors don’t seem to be too bothered by political situation. So, the GBP/USD outlook seems to be positive, and the pair could reach for the summer highs near 1.38, with the possibility of making its way towards 1.40 this week, if the Fed strikes a dovish tone.

 

 

How dovish will the Fed be?

 

While the UK data and BoE’s rate decision will be important for the GBP/USD outlook, a lot will also depend on the USD side of the pair which will be impacted by Wednesday’s FOMC meeting. This is a big one, and I’d argue it could be the catalyst that finally propels the pair towards the summer highs. A 25bp cut is almost a done deal, but what traders will really hang on is the tone of Powell’s press conference and the dot plot projections. If the Fed signals that more cuts are on the way – or admits that a 50bp move was seriously considered – that could be the green light for another leg lower in the dollar or higher in GBP/USD.

 

Personally, I’ll be watching how the market reacts to any mention of inflation being “well anchored” or the labour market “cooling more than expected.” That sort of language would be music to the ears of dollar bears, and it wouldn’t take much to send the greenback tumbling. On the flip side, a cautious Fed that hints at a “wait and see” approach might stall the rally, at least temporarily.

 

There’s also a bit of data to keep things lively before and after the decision. Tuesday’s retail sales could either reinforce the soft-landing narrative or raise fresh concerns about consumer demand. Thursday’s jobless claims will add another piece to the puzzle, while housing numbers on Wednesday will probably get drowned out by the Fed – but still worth a glance for clues on broader economic momentum.

 

Technical GBP/USD outlook: Trade ideas and levels to watch

 

 

If the Fed delivers a dovish surprise, I wouldn’t be shocked to see a quick test of 1.40 on the GBP/USD chart, although the more immediate target is the liquidity resting above the summer high of 1.3788. Traders looking to ride this move higher might find this week’s volatility offers some prime dip-buying opportunities, particularly around the now broken 1.3540-1.3580 range, which had been significant resistance in recent trade. Below here you have 1.3500 and then 1.3435-1.3460 range, although ideally from a bullish point of view you wouldn’t want rates to now pull back that deep.

 

 

 

-- Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R