GBP/USD Forecast: Pound Sterling Extends Gains after US Inflation Disappoints

Modified: Tuesday, 12 August 2025 15:02 BST - Written by Ben Hughes

STORY LINK GBP/USD Forecast: Pound Sterling Extends Gains after US Inflation Disappoints

The Pound to US Dollar (GBP/USD) exchange rate pushed to a two-week high on Tuesday, buoyed by softer-than-expected US inflation data and steady UK employment figures.

At the time of writing, GBP/USD was trading at around $1.3483, up roughly 0.4% from Tuesday’s opening levels.

The US Dollar (USD) came under pressure on Tuesday following the release of the July Consumer Price Index, which came in softer than markets had anticipated.

Headline inflation held steady at 2.7% year-on-year, falling just short of the 2.8% forecast. Meanwhile, core inflation, which excludes food and energy, rose to 3.1%, slightly above expectations.

Despite the elevated core reading, the cooler-than-expected headline figure is reinforcing bets that the Federal Reserve will begin cutting interest rates before year-end.

Indeed, markets are now placing in as much as 75bps of easing by the end of 2025.

The Pound (GBP) gained traction on Tuesday, following the release of the UK’s latest employment report.


Figures from the Office for National Statistics (ONS) showed the unemployment rate holding at 4.7% in June, with wage growth easing slightly from 5% to 4.6%.

Meanwhile, payroll numbers fell by just 8,000, far better than the anticipated 60,000 drop and the smallest decrease since January.

While the data confirmed that the labour market is gradually cooling, the pace of the slowdown does not yet appear sufficient to push the Bank of England (BoE) into accelerating its rate-cutting cycle.

Looking ahead, the Pound to US Dollar (GBP/USD) exchange rate may face a key test later this week when the UK’s second-quarter GDP figures are released.

Economists expect growth to slow sharply, with forecasts pointing to a 0.1% quarterly expansion, down from 0.7% in Q1. Such a result could prompt fresh calls for the BoE to step up policy support and fuel concerns over government finances, including the potential for more tax hikes.

In the meantime, geopolitical tensions may offer some support to the US Dollar, with investors likely to turn more cautious ahead of Friday’s planned meeting between US President Donald Trump and Russian President Vladimir Putin.

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TAGS: Pound Dollar Forecasts