The UK automotive manufacturing sector exhibited a complex trajectory in July, with data from the Society of Motor Manufacturers and Traders (SMMT) indicating a 5.6% increase in vehicle production to 69,127 units. However, the overall automotive output declined by 10.8%, primarily due to a downturn in commercial vehicle manufacturing. SMMT CEO Mike Hawes highlighted challenges such as waning consumer confidence and volatile trade flows, urging the government to implement more effective strategies to foster industry growth. Despite the U.S.-UK trade agreement, tariff-related disruptions continue to impact export strategies. Industry forecasts suggest a recovery in production volumes by 2026. Concurrently, confidence within the UK services sector remains subdued, with the CBI's August survey revealing a decline in optimism and activity levels among service providers, amid persistent cost pressures and difficulties passing costs onto consumers. The organization called on Chancellor of the Exchequer Rachel Reeves to avoid increasing corporate taxes in the upcoming autumn budget and to reassess labor policies that could impose additional burdens on employers, aiming to provide short-term economic certainty. Additionally, the Bank of England has set a historical record in short-term monetary market operations by allocating £75.652 billion in seven-day liquidity injections, reflecting its policy intent to maintain market liquidity during the quantitative tightening process.

Despite widespread market consensus on a potential interest rate cut in September, there remains significant internal disagreement within the Federal Reserve regarding the future policy trajectory. Policymakers appear to be divided into three main factions: dovish members advocating for multiple rate reductions, hawkish officials opposing easing measures, and centrist policymakers adopting a cautious approach. Chairman Powell is navigating a delicate balancing act—acknowledging downside risks to the labor market while warning that tariffs could prolong inflationary pressures. According to Matthew Luzzetti of Deutsche Bank, considering the divergent views within the committee, the most straightforward approach may be a gradual rate reduction, with subsequent actions increasingly data-dependent. Goldman Sachs emphasizes that if further signs of labor market softening emerge, the Fed may need to capitalize on the current policy window. The institution projects that, regardless of whether the economy slows or normalizes, the Fed is likely to complete this easing cycle by the first half of 2026, prior to the appointment of the next chair. Market expectations for a rate cut in September have risen to 89%, with the anticipated cumulative easing by year-end reaching 55 basis points. Consequently, weaker-than-expected data could reinforce rate cut expectations, exerting further downward pressure on the U.S. dollar index and potentially strengthening the British pound indirectly.

In the 4H timeframe, the GBPUSD is oscillating between the upper and lower Bollinger Bands, with the Bollinger channels narrowing and SMAs flattening and converging, indicating a potential trend reversal. Currently, the price has formed a bearish candlestick pattern, breaking below the middle Bollinger Band. The MACD line and signal line are approaching a death cross, and the RSI is at 47, suggesting a higher probability of a downward move. If the price fails to hold above the middle band, it may test the lower Bollinger Band or previous lows at approximately 1.344 and 1.340. In the 1W timeframe, after breaking above the EMA12, the price is retesting this level; a successful hold could lead to further gains toward 1.380 or even 1.400. Conversely, failure to sustain could result in declines toward 1.310 and 1.300. Following the MACD death cross, the MACD line and signal line are retracing toward the zero-axis, with the RSI at 56, not overbought, but with decreasing highs, indicating a possible correction. Overall, the correction phase appears incomplete. It is recommended to go short initially and then go long.

Trading Direction: Sell

Entry Price: 1.348

Target Price: 1.337

Stop Loss: 1.36

Support: 1.345, 1.34, 1.337

Resistance: 1.36, 1.362, 1.378