Pound Sterling adjusts before US PCE inflation figures

August 29, 2025

Pound Sterling’s Movement Amid Key Economic Data

Pound Sterling expected to drop to nearly 1.3500 against the US dollar before significant US inflation data.
Fed’s Waller mentioned that this could facilitate interest rate cuts in the upcoming policy meeting.
The UK currency has lagged behind its peers this week.

Pound Sterling (GBP) is anticipated to move towards approximately 1.3500 against the US dollar (USD) during Friday’s trading session in Europe. This adjustment follows a three-day winning streak, coinciding with the release of the US Personal Consumption Expenditure Price Index (PCE) data, which will be available at 12:30 in July.

The US Dollar Index (DXY), reflecting the dollar’s value against six major currencies, is hovering near 98.00.

Economists project that the core PCE inflation, a key metric favored by the Federal Reserve, is likely to increase to 2.9% annually, up from 2.8% in June, with a monthly rise of about 0.3%.

PCE inflation continues to play a pivotal role in shaping market expectations regarding Federal Reserve monetary policy. However, this time, the anticipated effect may be mitigated, as policymakers are more focused on the labor market’s growth. This shift is partly due to significant downward revisions of non-farm payroll data from May and June.

On Thursday, Federal Reserve Governor Christopher Waller expressed support for a 25 basis point cut in interest rates at the September policy meeting, while also highlighting concerns regarding labor market risks. “There are indications of labor market weakening, but I’m apprehensive that conditions could deteriorate sooner than expected,” Waller noted.

Market Overview: Pound Sterling’s Relative Weakness

On Friday, Sterling struggled against its counterparts during a rather light week for UK economic data. Despite expert opinions suggesting the Bank of England (BOE) would likely refrain from interest rate cuts for the remainder of the year, the currency remains under pressure.
This week, BOE Monetary Policy Committee member Catherine Mann voiced support for maintaining current interest rates for an extended duration, pointing to persistent inflationary pressures.
“Holding a non-tight but cautious stance seems appropriate right now to ensure sustainable inflation,” Mann stated, according to Reuters.
Looking ahead, the upcoming UK retail sales data for July, set to be released next week, will be a key indicator for the Pound. Economists are anticipating moderate growth in consumer spending.
Additionally, doubts surrounding the US dollar’s stability could lend some support to the GBP/USD pair. Concerns about the safe haven status of the dollar have been fueled by recent criticisms from US President Donald Trump regarding the Fed’s independence.
This week, President Trump took aim at Fed Governor Lisa Cook over a mortgage claim, resulting in Cook filing a lawsuit, deemed baseless, to retain her position. A hearing regarding the matter is scheduled for 2:00 PM GMT on Friday.
Historically, President Trump has criticized the Fed multiple times, threatening to replace Chairman Jerome Powell if interest rates weren’t lowered. Yet, he praised Powell after a recent speech at the Jackson Hole Symposium, which surprisingly seemed resistant to interest rate cuts.

Technical Analysis: Pound Sterling Maintains 20-Day EMA

Pound Sterling has edged down towards approximately 1.3500 against the US dollar on Friday. The overall trend for the GBP/USD pair appears sideways, remaining close to the 20-day exponential moving average (EMA) around 1.3468.

The chart suggests an inverted head and shoulders pattern on the daily frames, with the neckline around 1.3580.

The 14-day relative strength index (RSI) fluctuates within a range of 40.00-60.00, indicating a contraction in volatility.

Below, the August 11 low of 1.3400 acts as a critical support level, while the height of July 1 at nearly 1.3790 presents a significant resistance barrier.