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Published: 29 June 2026,07:38
Daily Market Analysis New
*Sterling remains under pressure as weakening UK economic data and persistent US dollar strength outweigh improving political stability.
*Markets are increasingly pricing in future Bank of England rate cuts as slowing growth continues to overshadow elevated inflation.
*Tomorrow’s UK GDP release could become the next key catalyst for sterling by reshaping expectations for Bank of England policy.
The British pound remains under pressure against the US dollar as investors balance weakening domestic economic conditions with ongoing political developments and persistent US dollar strength. Although sterling initially found support following Prime Minister Keir Starmer’s resignation and Andy Burnham’s emergence as the frontrunner to lead the Labour government, optimism has gradually faded as markets refocus on the UK’s weakening economic outlook. Investors are awaiting Burnham’s policy agenda for greater clarity on fiscal priorities, but political stability alone has been insufficient to offset concerns over slowing growth and widening monetary policy divergence with the United States.
Recent economic data have painted a softer picture of the UK economy. Flash PMI surveys slipped into contraction territory, with the composite index falling to a 14-month low, reflecting weaker activity across manufacturing and services. Rising input costs, geopolitical uncertainty, and elevated energy prices have further weighed on business confidence. As a result, markets are increasingly pricing in the possibility of Bank of England rate cuts later this year, despite inflation remaining above target. While the BoE kept interest rates unchanged at 3.75%, policymakers acknowledged growing downside risks to growth while warning that energy-driven inflation could complicate future policy decisions.
Attention now turns to tomorrow’s final Q1 UK GDP release, which is expected to provide further insight into the economy’s underlying strength. The preliminary estimate showed stronger-than-expected growth of 0.6% quarter-on-quarter, driven mainly by the services sector. However, economists expect momentum to slow in the coming quarters as weaker PMIs, softer consumer demand, rising business costs, and geopolitical uncertainty weigh on activity. A weaker-than-expected GDP revision would likely strengthen expectations for future BoE rate cuts and pressure sterling, while an upside surprise could provide temporary support by reducing expectations of near-term monetary easing.
External risks also remain an important driver for the pound. Renewed military exchanges between the United States and Iran have strengthened safe-haven demand for the US dollar, while higher oil prices continue to pose inflationary challenges for the UK economy despite recent diplomatic efforts to reduce tensions. Consequently, sterling is expected to remain sensitive to both domestic economic releases and broader global risk sentiment.
Overall, the near-term outlook for the pound remains cautiously bearish. Although political uncertainty has eased, softer economic data, growing expectations of Bank of England easing, persistent US dollar strength, and fragile geopolitical conditions are likely to keep GBP/USD under pressure unless UK data improve materially or US economic momentum weakens.
Technical Analysis
GBPUSD, H4:
GBP/USD remains under bearish pressure after extending its decline and finding temporary support around the 1.3180 level. The pair continues to trade below its previous support at 1.3295, which has now turned into immediate resistance, reinforcing the prevailing downtrend as sellers maintain control of the market.
Momentum indicators suggest that bearish momentum is beginning to ease, although confirmation of a stronger recovery is still lacking. The Relative Strength Index (RSI) has recovered toward the neutral 50 level after rebounding from oversold territory, indicating that downside pressure has moderated. Meanwhile, the Moving Average Convergence Divergence (MACD) has produced a bullish crossover below the zero line, with the histogram turning positive, suggesting that short-term buying momentum is gradually improving despite the broader bearish trend remaining intact.
Resistance Levels: 1.3295, 1.3420
Support Levels: 1.3180, 1.3150
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