Economic data boosts GBP, but short-term technical indicators need to be wary of a pullback
2025-08-14 20:20:22
On Thursday (August 14), the British pound attracted buying after the release of strong UK gross domestic product (GDP) and industrial production data, sending the GBP/USD exchange rate appreciating. According to data released by the UK Office for National Statistics (ONS), the UK economy grew by 0.3% in the second quarter of 2025, exceeding market expectations of 0.1%. GDP grew by 0.7% in the first quarter. June economic growth reached 0.4%, far exceeding the expected 0.1%, demonstrating the resilience of the UK economy after a contraction in May. Furthermore, monthly increases in manufacturing and industrial production of 0.5% and 0.7%, respectively, also exceeded expectations.
Strong economic data from the UK suggests the economy may be more robust than previously expected, creating favorable conditions for the Bank of England (BoE) to avoid further interest rate cuts, supporting the pound's rise. Previously, the BoE cut interest rates by 25 basis points to 4.00% at its monetary policy meeting this month and maintained its guidance for "gradual and cautious" monetary expansion. Although the decision-making process was tense, with four members supporting maintaining interest rates unchanged, the final decision favored a rate cut.
Meanwhile, the US dollar retreated amid widespread market expectations that the Federal Reserve would cut interest rates at its September monetary policy meeting. The US Dollar Index (DXY) briefly dipped to a two-week low near 97.60, further supporting the pound's gains. Traders have almost fully priced in a 25 basis point rate cut from the Federal Reserve in September. According to the CME FedWatch tool, market expectations for a Fed rate cut are growing, and the magnitude and timing of the cut could put significant pressure on the US dollar.
From a technical perspective, after the recent strong rebound, the GBP/USD price has approached the 1.3600 level, which is also the upper track area of the Bollinger Bands. The chart shows that after a period of consolidation and decline, the exchange rate found support near 1.3140 and rebounded to the current resistance area.
The Bollinger Bands indicate that the price is oscillating near the upper band, suggesting that the pound could continue to rise after breaking through this resistance level, but caution should be exercised against the risk of a false breakout. The price briefly reached a high of 1.3788 but failed to maintain this level, resulting in a period of volatile trading. Therefore, the next move will depend on whether the pound can break through this resistance level and advance towards higher targets, or whether it will retrace and retest the support below.
The MACD indicator shows a clear upward trend. The current MACD line is above the signal line, indicating that the bullish force of the market remains strong in the short term.
Market sentiment is clearly bullish on the British pound, driven in part by strong UK economic data but more importantly by market expectations of a Federal Reserve rate cut. This expectation has intensified selling pressure on the US dollar and strengthened the pound's upward momentum. As expectations of a Fed rate cut grow, demand for the dollar as a safe haven weakens, making the pound more attractive in the market.
While bullish sentiment for the British pound is supported by fundamental data, it faces some technical pressure. The upper Bollinger Bands form a short-term resistance zone, making traders cautious about a continued rise in the pound. If the exchange rate fails to break through this upper band, a pullback or consolidation could occur, limiting bullish sentiment in the short term.
Bullish Outlook:
Looking ahead, if the British pound can break through the current technical resistance level of 1.3600 and steadily move above the high of 1.3788, it is expected to rise further and challenge the higher target of around 1.4000. Considering the strong performance of the UK economy and the market's expectations of a Fed rate cut, the British pound is likely to continue to strengthen, especially with the US dollar under pressure, and will benefit from more optimistic market sentiment.
Bearish Outlook:
However, if the pound fails to break through the current resistance level, it could face strong selling pressure around 1.3600, pushing the exchange rate back towards the support area of 1.3270. A further break below this support level could open up further downside, potentially testing the secondary support level of 1.3140. The combined influence of technical factors and market sentiment means that the short-term trend of the pound remains uncertain.
Strong economic data from the UK suggests the economy may be more robust than previously expected, creating favorable conditions for the Bank of England (BoE) to avoid further interest rate cuts, supporting the pound's rise. Previously, the BoE cut interest rates by 25 basis points to 4.00% at its monetary policy meeting this month and maintained its guidance for "gradual and cautious" monetary expansion. Although the decision-making process was tense, with four members supporting maintaining interest rates unchanged, the final decision favored a rate cut.
Meanwhile, the US dollar retreated amid widespread market expectations that the Federal Reserve would cut interest rates at its September monetary policy meeting. The US Dollar Index (DXY) briefly dipped to a two-week low near 97.60, further supporting the pound's gains. Traders have almost fully priced in a 25 basis point rate cut from the Federal Reserve in September. According to the CME FedWatch tool, market expectations for a Fed rate cut are growing, and the magnitude and timing of the cut could put significant pressure on the US dollar.
Technical aspects
From a technical perspective, after the recent strong rebound, the GBP/USD price has approached the 1.3600 level, which is also the upper track area of the Bollinger Bands. The chart shows that after a period of consolidation and decline, the exchange rate found support near 1.3140 and rebounded to the current resistance area.
The Bollinger Bands indicate that the price is oscillating near the upper band, suggesting that the pound could continue to rise after breaking through this resistance level, but caution should be exercised against the risk of a false breakout. The price briefly reached a high of 1.3788 but failed to maintain this level, resulting in a period of volatile trading. Therefore, the next move will depend on whether the pound can break through this resistance level and advance towards higher targets, or whether it will retrace and retest the support below.
The MACD indicator shows a clear upward trend. The current MACD line is above the signal line, indicating that the bullish force of the market remains strong in the short term.
Market Sentiment Observation
Market sentiment is clearly bullish on the British pound, driven in part by strong UK economic data but more importantly by market expectations of a Federal Reserve rate cut. This expectation has intensified selling pressure on the US dollar and strengthened the pound's upward momentum. As expectations of a Fed rate cut grow, demand for the dollar as a safe haven weakens, making the pound more attractive in the market.
While bullish sentiment for the British pound is supported by fundamental data, it faces some technical pressure. The upper Bollinger Bands form a short-term resistance zone, making traders cautious about a continued rise in the pound. If the exchange rate fails to break through this upper band, a pullback or consolidation could occur, limiting bullish sentiment in the short term.
Market Outlook
Bullish Outlook:
Looking ahead, if the British pound can break through the current technical resistance level of 1.3600 and steadily move above the high of 1.3788, it is expected to rise further and challenge the higher target of around 1.4000. Considering the strong performance of the UK economy and the market's expectations of a Fed rate cut, the British pound is likely to continue to strengthen, especially with the US dollar under pressure, and will benefit from more optimistic market sentiment.
Bearish Outlook:
However, if the pound fails to break through the current resistance level, it could face strong selling pressure around 1.3600, pushing the exchange rate back towards the support area of 1.3270. A further break below this support level could open up further downside, potentially testing the secondary support level of 1.3140. The combined influence of technical factors and market sentiment means that the short-term trend of the pound remains uncertain.
- Risk Warning and Disclaimer
- The market involves risk, and trading may not be suitable for all investors. This article is for reference only and does not constitute personal investment advice, nor does it take into account certain users’ specific investment objectives, financial situation, or other needs. Any investment decisions made based on this information are at your own risk.
