empty
15.05.2025 12:38 AM
The Pound Consolidates, Another Attempt at Upward Movement Expected

The UK labor market report showed that wage growth remains high despite a slight slowdown— the three-month average declined from 5.9% to 5.6%, and including bonuses, it decreased from 5.7% to 5.5%, which was higher than the forecast of 5.2%.

This image is no longer relevant

Inflation in the UK is already high and, as claimed, due to base effects, it will remain elevated for the next few months before beginning to decline. This is a bullish factor for the pound, despite the rhetoric and actions of the Bank of England, which lowered the interest rate last week from 4.5% to 4.25%. While a nearly unanimous decision and a more dovish tone were expected, the opposite happened—a split within the Monetary Policy Committee became evident, and the final statement turned out even more hawkish than the previous one. The hawkish shift came from the majority camp, where three members, including Governor Bailey, stated that the decision was finely balanced between cutting and holding.

The BoE lowered its inflation forecast for the entire projection period, ending at 1.9% in 2028, mainly reflecting lower energy prices. Of course, no one knows what energy prices will be not only in 2029 but even by the end of this year, so such a forecast holds little weight.

Markets are currently pricing in about 60 basis points in rate cuts by the end of the year, less than what is expected for the Federal Reserve, which is overall more bullish than neutral for the pound. However, this forecast assumes inflation will indeed slow down, and it's clear that as long as wage growth remains high, expectations of price declines may continue to be delayed.

BoE Chief Economist Huw Pill stated on Tuesday that he is concerned UK inflation may prove stronger than the central bank expects, and that interest rates may need to remain higher than markets currently anticipate.

The net long position on the pound rose by £435 million over the reporting week to £2.44 billion. Speculative positioning is bullish, but the fair value estimate has lost momentum and lacks clear direction.

This image is no longer relevant

The GBP/USD pair has held above the support zone at 1.3100/30, which, from a technical standpoint, suggests a good likelihood of a resumption of upward movement. However, there is currently no clear driver. The price has fully priced in the expectation of future BoE actions and inflation. New data will likely drive the pound out of its range. On Thursday, GDP data for Q1 and March industrial production will be published, followed by the April inflation report next week. These releases are expected to provide insight into the future direction of the pound, especially since high inflation will continue to be a factor for at least a few more months. We are now observing consolidation and range-bound trading between 1.3150 and 1.3400.

Kuvat Raharjo,
Analytical expert of InstaForex
© 2007-2025
Select timeframe
5
min
15
min
30
min
1
hour
4
hours
1
day
1
week
Earn on cryptocurrency rate changes with InstaForex
Download MetaTrader 4 and open your first trade
  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    JOIN CONTEST

Recommended Stories

The Fed Is Right—It's Too Early to Cut Rates (I Expect a Decline in #SPX and an Increase in Gold Prices)

The fresh U.S. Consumer Price Index (CPI) data released on Wednesday, although below the consensus forecast, confirmed the persistence of inflationary pressure. This fully justifies the Federal Reserve's reluctance

Pati Gani 10:37 2025-06-12 UTC+2

Trump Threatens Tariffs Again – Markets React

President Donald Trump announced yesterday that he intends to send letters to trade partners within the next one to two weeks outlining unilateral tariff rates. This is ahead

Jakub Novak 09:10 2025-06-12 UTC+2

What to Pay Attention to on June 12? A Breakdown of Fundamental Events for Beginners

A significant number of macroeconomic reports are set for Thursday, but only a few are truly important. The key reports to highlight are the GDP and industrial production data from

Paolo Greco 05:52 2025-06-12 UTC+2

GBP/USD Overview – June 12: Protests Against Trump and Fed Policy

The GBP/USD currency pair continued to trade very calmly on Wednesday. Naturally, when U.S. inflation data was released, we saw a brief burst of market reaction—though it didn't last long

Paolo Greco 04:07 2025-06-12 UTC+2

EUR/USD Overview – June 12: Is There Light at the End of the Tunnel?

The EUR/USD currency pair continued to trade very calmly throughout Wednesday. The market showed no reaction whatsoever to the seemingly positive news regarding U.S.-China trade negotiations. Why? Because that positivity

Paolo Greco 04:07 2025-06-12 UTC+2

Donald Trump Plans to Suppress the Uprising

For several consecutive days, protests and unrest have continued in some major U.S. cities, sparked by Donald Trump's new immigration policy. This time, the U.S. President has decided to deport

Chin Zhao 00:35 2025-06-12 UTC+2

EUR/USD. In the Shadow of the Trade Deal: U.S. Inflation Report Pressures the Greenback

A mixed U.S. inflation report pressured the greenback. The dollar index returned to 98.00, while the EUR/USD pair refreshed its weekly high, rising to 1.1491. Additional pressure on the U.S

Irina Manzenko 00:35 2025-06-12 UTC+2

Will the Dollar Maintain the Status Quo?

To make accurate predictions about the future, one must examine the past. The more than 10% rally in EUR/USD since the beginning of the year has been driven by four

Marek Petkovich 00:35 2025-06-12 UTC+2

XAU/USD. Analysis and Forecast

Currently, the price of gold remains confined within a weekly range. The key factors supporting price growth include a decision by the U.S. federal appellate court to uphold President Donald

Irina Yanina 18:35 2025-06-11 UTC+2

USD/JPY. Analysis and Forecast

At this stage, the Japanese yen continues to trade within an intraday consolidation range, approaching the two-week low against the U.S. dollar reached yesterday. The main factors influencing the movement

Irina Yanina 18:33 2025-06-11 UTC+2
Can't speak right now?
Ask your question in the chat.
Widget callback
 

Dear visitor,

Your IP address shows that you are currently located in the USA. If you are a resident of the United States, you are prohibited from using the services of InstaFintech Group including online trading, online transfers, deposit/withdrawal of funds, etc.

If you think you are seeing this message by mistake and your location is not the US, kindly proceed to the website. Otherwise, you must leave the website in order to comply with government restrictions.

Why does your IP address show your location as the USA?

  • - you are using a VPN provided by a hosting company based in the United States;
  • - your IP does not have proper WHOIS records;
  • - an error occurred in the WHOIS geolocation database.

Please confirm whether you are a US resident or not by clicking the relevant button below. If you choose the wrong option, being a US resident, you will not be able to open an account with InstaForex anyway.

We are sorry for any inconvenience caused by this message.