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GBP/USD Falls Toward 1.3575 as Markets Brace for GDP, Trade Fallout
Summary:
The British Pound weakened to near 1.3575 against the U.S. Dollar on Thursday as the Bank of England flagged intensifying risks to the UK economy in its mid-year Financial Policy Committee report.
Trading
1.35500
ENTRY
1.34000
TGT
1.36500
SL
-- -- --
0
Point
Flat
1.34000
TGT
CLOSING
1.35500
ENTRY
1.36500
SL
The British Pound drifted lower against the U.S. Dollar on Thursday, extending its recent decline to trade near 1.3575 as markets digested a series of unsettling developments ranging from fresh warnings by the Bank of England to rising geopolitical and trade tensions. Investors remained cautious ahead of the UK’s latest GDP and manufacturing output figures, expected Friday, while growing fiscal risks and external policy shocks contributed to Sterling’s vulnerability.
The latest move in the Pound came in the wake of the Bank of England’s semi-annual Financial Stability Report, which painted a far more cautious picture of the UK economy than in previous updates. The Financial Policy Committee warned that the risk of sudden asset price declines, market fragmentation, and rising sovereign debt pressures had grown significantly. In particular, the report cited heightened geopolitical tensions, the growing fragmentation of global trade and financial systems, and the UK's own debt trajectory as key concerns. It noted that historical relationships between assets—such as the traditional correlation between bonds and equities—could break down further, raising the risk of instability in financial markets.
What stood out in the report was not just the tone, but the underlying worry about the UK’s fiscal and investment climate. Business sentiment, already fragile amid political transitions and tax uncertainty, was flagged as a key downside risk. The Bank pointed to a pronounced hesitancy among UK businesses to commit to new investments, a trend that threatens to undermine labor market gains and stall productivity improvements. In an economy already experiencing anaemic growth, this is a red flag.
Further clouding the domestic picture are mounting concerns about the UK’s fiscal discipline. Just last week, Chancellor of the Exchequer Rachel Reeves announced a significant expansion in Universal Credit—a move that, while aimed at easing household pressures, also risks undermining the government’s commitment to restoring fiscal balance. The announcement raised eyebrows across the economic and political spectrum, with critics questioning whether such large-scale spending initiatives are prudent at a time when the UK’s sovereign debt remains elevated and interest costs are high. In the aftermath, yields on UK government bonds moved higher, reflecting increased investor concern over future borrowing needs.
Internationally, another curveball came from Washington, where President Donald Trump announced a sweeping package of new tariffs targeting 21 nations. The tariffs, which are set to go into effect on August 1, mark a dramatic escalation in the U.S. administration’s trade policy and have injected fresh uncertainty into an already jittery global economy. While the list of targeted countries has yet to be fully disclosed, fears are mounting that the UK—already grappling with its post-Brexit trade realignment—could find itself indirectly affected through supply chain disruptions or retaliatory measures from its trading partners.
The Pound's weakness reflects not only the domestic fragilities outlined by the Bank of England but also broader concerns about where the global economy is headed next. With a fresh wave of trade protectionism from the United States threatening to upend market equilibrium and the UK’s own political and fiscal credibility in question, investors are showing a clear preference for the safety of the U.S. Dollar.
Technical Analysis 
From a technical perspective, GBP/USD continues to trade within a descending channel on the short-term charts. Price action has repeatedly tested the neckline of this pattern after a period of corrective consolidation, indicating potential for renewed downside pressure. The 100-period Simple Moving Average hovers well above the price, confirming the prevailing bearish structure. Momentum indicators such as the MACD suggest a weakening of bullish momentum, adding weight to the bearish case.
The price is now consolidating just above key support, with traders watching for a confirmed breakdown below the neckline to validate a continuation of the bearish trend. Should this occur, the pair could slide toward the next significant support level near 1.3400, which aligns with the intersection of the descending wedge’s lower boundary and the long-term ascending trendline. Failure to hold this level would invite deeper losses, possibly extending the decline toward the 1.3300 zone in the coming weeks.
TRADE RECOMMENDATION
SELL GBPUSD
ENTRY PRICE: 1.3550
STOP LOSS: 1.3650
TAKE PROFIT: 1.3400
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