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Economic data helps pound, but short-term technical needs to be vigilant about pullbacks
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Hello everyone, today XM Foreign Exchange will bring you "[XM Foreign Exchange Market Review]: Economic data helps the pound, but the short-term technical side needs to be vigilant about pullbacks." Hope it will be helpful to you! The original content is as follows:
On Thursday (August 14), the British pound attracted market buying after releasing strong UK GDP and industrial production data, and rose against the US dollar (GBP/USD). According to data released by the Office for National Statistics (ONS), the UK economy grew 0.3% in the second quarter of 2025, exceeding market expectations of 0.1%. GDP growth in the first quarter was 0.7%. Economic growth reached 0.4% in June, far exceeding the expected 0.1%, showing resilience of the UK economy after shrinking in May. In addition, the monthly growth rate of manufacturing and industrial production was 0.5% and 0.7% respectively, which is also a stronger-than-expected performance.
The strong UK economic data suggests that the economy may be more stable than previously expected, creating favorable conditions for the Bank of England to avoid further rate cuts, supporting the pound's rise. Earlier, the Bank of England lowered interest rates by 25 basis points to 4.00% at this month's monetary policy meeting and maintained a "gradually cautious" monetary expansion guidance. Although the decision process for the rate cut was very tense and the four members supported keeping interest rates unchanged, the final decision was still inclined to cut rates.
At the same time, the dollar saw a pullback as markets generally expected the Fed to cut interest rates at its monetary policy meeting in September. The dollar index (DXY) once fell to a two-week low of around 97.60, further supporting the pound's gains. Traders have almost fully priced their expectations that the Fed will cut interest rates by 25 basis points in September. According to the CMEFedWatch tool, the market's expectations for the Fed's rate cut are increasing, and the extent and timing of the Fed's interest rate cut may put greater pressure on the US dollar.
Technical perspective
From the technical perspective, after the recent strong rebound, the price of GBP/USD has approached the level of 1.3600, and this price range is also the upper rail area of the Bollinger Band. The chart shows that after a period of consolidation and downward, the exchange rate found support around 1.3140 and rebounded to near the current resistance zone.
The Bollinger Band shows that the price fluctuates near the upper track, which means that the pound may continue to rise after breaking through this resistance level, but also be wary of the risk of false breakthroughs. The price briefly hit a high of 1.3788, but failed to maintain it at this level, forming a certain volatile trend. Therefore, the next market will depend on whether the pound can break through the current resistance and move towards a higher target, or whether it will retreat 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 market's bullish power is still strong in the short term.
Preview of Market Sentiment
Current market sentiment is clearly inclined toward the bulls of the pound, partly due to the strong performance of the UK economic data, and more importantly, the market's expectations of the Fed's interest rate cut. This expectation has exacerbated the selling pressure of the US dollar and strengthened the momentum of the pound. As expectations of Fed rate cuts heat up, market demand for safe-haven for the US dollar has weakened, making the pound more attractive in the market.
However, although the bullish sentiment of the pound is supported by fundamental data, there is also some technical pressure. The upper rail of the Bollinger band forms a short-term resistance area, which makes traders cautious about the continued rise of the pound. If the exchange rate fails to effectively break through the upper track area, a correction or consolidation may occur, resulting in limited bullish sentiment in the short term.
Future Outlook
Bules Outlook:
From the future outlook, if the pound can break through the current technical resistance level of 1.3600 and steadily break through the high point of 1.3788, it is expected to rise further and challenge the higher target level around 1.4000. Given the strong performance of the UK economy and market expectations for the Fed's interest rate cut, the pound is likely to continue to strengthen, especially as the dollar is under pressure, which will benefit from more optimistic market sentiment.
Bell Outlook:
However, if the pound fails to effectively break through the current resistance level, it is possible to encounter strong selling pressure around 1.3600, causing the exchange rate to fall to the support area of 1.3270. If the price falls further below this support, it may open downside space and test the secondary support of 1.3140. The dual impact of technical and market sentiment means that the short-term trend of the pound is still full of uncertainty.
The above content is all about "[XM Foreign Exchange Market Review]: Economic data helps the pound, but short-term technical needs to be vigilant of pullbacks". It is carefully www.xmtraders.compiled and edited by the editor of XM Foreign Exchange. I hope it will be helpful to your trading! Thanks for the support!
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