GBP/USD outlook: Forex Friday September 12, 2025

The GBP/USD eased somewhat in response to this morning’s UK data dump, which overall was a touch weaker than expected. Looking ahead, the focus will turn to US consumer sentiment and inflation expectations data from the University of Michigan, due at 14:00 GMT, before attention turns to the big central bank decisions next week, when both the Fed and BoE, among several others, will be deciding on interest rates. With the Fed almost certain to cut and the BoE now likely to hold fire, interest rate differential between the two nations should narrow further, providing a positive backdrop for the GBP/USD outlook.

 

UK economy stagnated in July

 

This morning we had some mixed-to-weak UK economic data, which confirmed output stagnated in July as expected, but there was an unexpected 1.3% drop in manufacturing production when a small gain was expected. The small uptick in construction output or the slightly better than expected performance of the services sector were not enough to trigger a pound rally. Despite the soft data, the Bank of England, is now likely to wait until December before cutting rates again. This should keep the pound supported.

 

FOMC rate cut foregone conclusion: all about forward guidance

 

The week ahead is packed with central bank rate decisions, which could lead to heightened volatility in the FX space. The Fed’s decision is the big one on Wednesday, 17th September. Evidence of cooling consumer demand and a weakening jobs market justifies a renewed loosening of policy. While CPI at 2.9% remains above target and tariffs are likely to keep it elevated in the near term, the need for more support for the economy means the Fed is likely to see through higher inflation in the near term and deliver a 25bp cut on Wednesday and signal more policy loosening for the months ahead. The US dollar will not react much on the decision to cut given that this outcome is now fully priced in. What will matter more is the Fed’s tone and signals about the near-term policy outlook both in the policy statement and the dot plots, as well as during Powell’s press conference.

 

GBP/USD outlook: Will BoE signal another cut for November or December?

 

The BoE will decide on its own policy a day later on Thursday, September 18. Following a hugely divided decision to cut interest rates by 25 basis points at the UK central bank’s meeting last month, a hold is priced in for this meeting. Mostly stronger economic data including retail sales and PMIs, and not to mention the recent acceleration in CPI to 3.8% as well as the later timing of the autumn budget, means the market’s expectations of another cut is being pushed to December from November. If confirmed by a hawkish-leaning MPC, then this should keep the GBP/USD outlook supported on the view that the US-UK interest rates differentials would narrow further. Also watch for the vote split, which will show whether the division within the MPC has narrowed. Some 3 members are likely to vote for a cut again, but should there be only two or fewer then that would likely trigger a pound rally. In terms of the forward guidance, this is a grey area. We doubt that their tone will change dramatically just a month later, unless wages and CPI data released earlier in the week show huge surprises.

 

 

Technical GBP/USD outlook: Key levels to watch

 

 

At the time of writing, the GBP/USD chart was holding below a key resistance band  between 1.3550 and 1.3588, an area that has been tested and held several times in recent weeks. But the more a level is tested, the more likely it will break in the direction of the test. So, a bullish breakout is what I am still expecting to see. If the cable does clear this zone, then would be a positive technical development for the GBP/USD outlook as it will likely pave the way for a continuation towards the July high at 1.3788. on the downside, short-term support comes in at 1.3500 first ahead of 1.3460 and 1.3435 next.

 

 

 

 

 

 

-- Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R