A life-or-death battle for the British pound at 1.36! The US-Russia summit and UK CPI data may determine the outcome for both bulls and bears.
2025-08-15 17:44:31
GBP/USD edged back up to around 1.3550 on Friday (August 15), partially recovering Thursday's losses after the US producer price index (PPI) for July showed wholesale prices saw their biggest increase in three years, driving a strong rebound in the dollar.
The U.S. dollar index (DXY), which tracks the greenback against six major currencies, edged down to around 97.85, but still largely held on to Thursday's rebound from a two-week low around 97.60.
Data showed that both the overall PPI and core PPI (excluding volatile food and energy prices) rose 0.9% month-on-month in July, compared with the same period in June. The hot PPI data suggests that US companies are unwilling to absorb the impact of tariffs themselves and are passing the costs on to consumers.
Rising inflation has cast doubt on market experts' expectations of a September rate cut by the Federal Reserve. Analysts at High Frequency Economics noted, "This report strongly supports the Fed's wait-and-see stance on policy adjustments."
Despite the high inflation data, the CME Fed Watch tool shows that traders still expect a high probability of a rate cut in September. The July CPI report released on Tuesday showed a cooling labor market and a lack of evidence of tariff effects being passed through to consumer prices, which strengthened the market's expectations of a rate cut.
Market analysts believe that consumer price increases were relatively mild due to importers stockpiling inventory to cushion the impact of price increases ahead of the imposition of tariffs. However, according to CBS, analysts at Oxford Economics warned that "as inventories are depleted and companies adjust pricing in the face of profit margin pressures, future data may show more comprehensive signs of tariff-driven inflation."
Sterling trades steady as focus shifts to UK CPI data
The British pound sterling exchange rate remained within a narrow range during the day, with trading volume thin as investors awaited clear signals from the Bank of England regarding its monetary policy direction in the second half of the year. Financial markets generally expect the Bank of England to maintain interest rates due to persistently high inflationary pressures in the UK. Better-than-expected second-quarter GDP data also provided policymakers with some breathing room.
Data released Thursday by the UK Office for National Statistics (ONS) showed that the economy grew by 0.3% quarter-on-quarter in the second quarter, beating expectations for 0.1% growth but slowing significantly from the 0.7% growth in the first quarter. Economists warn that global trade risks, weak labor demand, and the possibility of tax increases in Chancellor of the Exchequer Rachel Reeves' autumn budget will be major factors dragging down UK economic growth in the short term. Economists at RSM UK, the accounting firm, are quoted as saying, "Given persistently low consumer confidence, weak global demand, and expectations of tax increases, we expect it will be difficult for economic growth to accelerate significantly." The likelihood of Reeves raising taxes is high, as the impact of increased welfare spending announced in early July on fiscal targets needs to be offset.
Market focus will shift to the UK's July CPI data, due out on Wednesday. Investors will be more focused on the US retail sales data for July, due out at 8:30 PM Beijing time. Market expectations are that the month-over-month growth rate will slow to 0.5% (up from 0.6% previously).
Globally, financial market participants are closely watching Friday's US-Russia summit in Alaska. US President Trump will meet with Russian leader Vladimir Putin to discuss ending the conflict between Russia and Ukraine. According to Reuters, Trump expressed confidence on Thursday that Putin is ready to end the conflict, but that achieving peace may require at least a second round of talks that includes Ukrainian leaders.
Technical analysis: The short-term trend for the British pound remains bullish
GBP/USD is currently trading around 1.3550, having retreated from Thursday's two-month high of 1.3600. Technically, the short-term trend remains bullish as the pair remains above its 20-day exponential moving average (EMA) of 1.3448.
The 14-day relative strength index (RSI) is attempting to break above the 60 mark, a successful break above which would confirm new bullish momentum.
The key support level is the August 11 low of 1.3400, while the upward resistance level is around the July 1 high of 1.3790.
(GBP/USD daily chart, source: Yihuitong)
At 17:36 Beijing time, the pound sterling was trading at 1.3552/53 against the US dollar.
The U.S. dollar index (DXY), which tracks the greenback against six major currencies, edged down to around 97.85, but still largely held on to Thursday's rebound from a two-week low around 97.60.
Data showed that both the overall PPI and core PPI (excluding volatile food and energy prices) rose 0.9% month-on-month in July, compared with the same period in June. The hot PPI data suggests that US companies are unwilling to absorb the impact of tariffs themselves and are passing the costs on to consumers.
Rising inflation has cast doubt on market experts' expectations of a September rate cut by the Federal Reserve. Analysts at High Frequency Economics noted, "This report strongly supports the Fed's wait-and-see stance on policy adjustments."
Despite the high inflation data, the CME Fed Watch tool shows that traders still expect a high probability of a rate cut in September. The July CPI report released on Tuesday showed a cooling labor market and a lack of evidence of tariff effects being passed through to consumer prices, which strengthened the market's expectations of a rate cut.
Market analysts believe that consumer price increases were relatively mild due to importers stockpiling inventory to cushion the impact of price increases ahead of the imposition of tariffs. However, according to CBS, analysts at Oxford Economics warned that "as inventories are depleted and companies adjust pricing in the face of profit margin pressures, future data may show more comprehensive signs of tariff-driven inflation."
Sterling trades steady as focus shifts to UK CPI data
The British pound sterling exchange rate remained within a narrow range during the day, with trading volume thin as investors awaited clear signals from the Bank of England regarding its monetary policy direction in the second half of the year. Financial markets generally expect the Bank of England to maintain interest rates due to persistently high inflationary pressures in the UK. Better-than-expected second-quarter GDP data also provided policymakers with some breathing room.
Data released Thursday by the UK Office for National Statistics (ONS) showed that the economy grew by 0.3% quarter-on-quarter in the second quarter, beating expectations for 0.1% growth but slowing significantly from the 0.7% growth in the first quarter. Economists warn that global trade risks, weak labor demand, and the possibility of tax increases in Chancellor of the Exchequer Rachel Reeves' autumn budget will be major factors dragging down UK economic growth in the short term. Economists at RSM UK, the accounting firm, are quoted as saying, "Given persistently low consumer confidence, weak global demand, and expectations of tax increases, we expect it will be difficult for economic growth to accelerate significantly." The likelihood of Reeves raising taxes is high, as the impact of increased welfare spending announced in early July on fiscal targets needs to be offset.
Market focus will shift to the UK's July CPI data, due out on Wednesday. Investors will be more focused on the US retail sales data for July, due out at 8:30 PM Beijing time. Market expectations are that the month-over-month growth rate will slow to 0.5% (up from 0.6% previously).
Globally, financial market participants are closely watching Friday's US-Russia summit in Alaska. US President Trump will meet with Russian leader Vladimir Putin to discuss ending the conflict between Russia and Ukraine. According to Reuters, Trump expressed confidence on Thursday that Putin is ready to end the conflict, but that achieving peace may require at least a second round of talks that includes Ukrainian leaders.
Technical analysis: The short-term trend for the British pound remains bullish
GBP/USD is currently trading around 1.3550, having retreated from Thursday's two-month high of 1.3600. Technically, the short-term trend remains bullish as the pair remains above its 20-day exponential moving average (EMA) of 1.3448.
The 14-day relative strength index (RSI) is attempting to break above the 60 mark, a successful break above which would confirm new bullish momentum.
The key support level is the August 11 low of 1.3400, while the upward resistance level is around the July 1 high of 1.3790.
(GBP/USD daily chart, source: Yihuitong)
At 17:36 Beijing time, the pound sterling was trading at 1.3552/53 against the US dollar.
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