GBP/USD Forecast: PPI Ignites USD Bulls, Can it Last?

[Redator]

GBPUSD has retreated from a key swing high as US PPI data came in hot during the US session. The data saw a downward revision to rate cut bets by market participants and thus offering the US Dollar support.

Hot US PPI Data. A sign of Things to Come?

In July, the US Producer Price Index (PPI) rose by 0.9% compared to the previous month, which had no change. On a yearly basis, PPI increased by 3.3%, higher than the expected 2.5% and up from June's 2.3%. Core PPI, which helps calculate the Personal Consumption Expenditures (PCE) Price Index, jumped 3.7% annually, a big rise from June's 2.6%.

The report shows that companies are passing tariff costs onto customers. The reason this has not yet been felt by consumers or reflected in the CPI could be two fold. It could be that the costs have not filtered through on the consumer side yet and we will see an uptick in the months ahead. The other reason could be that the increases here could be offset by declines in other areas when calculating the CPI number.

Either way, today's data adds a new dimension to discussions and comments yesterday by US Treasury Secretary Scott Bessent who said companies are absorbing the tariffs. For more on this, read US Dollar Index (DXY) at Risk of Freefall. Key Confluence Level In Play

Additional data boosted the Dollar, as Initial Jobless Claims for the week ending August 9 came in at 224K, better than the forecast of 228K and the previous 226K. Continuing Claims, which had raised concerns about a slowing job market, dropped slightly from 1.964 million to 1.953 million.

UK Posts Reasonable GDP Number in the Face of Headwinds

The UK’s 0.3% growth in the second quarter seems decent, especially after the stronger 0.7% in the first quarter, which was boosted by US tariff changes and a stamp duty deadline. A strong June and revised April data helped lift the numbers.

However, the growth isn’t as solid as it seems. Much of it came from government spending on vaccinations and volatile factors like inventories, while household spending and business investment were weaker than earlier in the year.

The Bank of England isn’t putting much weight on these figures, noting that the economy barely grew in the first quarter despite strong GDP numbers. Growth has also tended to be stronger in the first half of the year and weaker in the second, possibly due to issues with how the data is adjusted.

Despite the concerns by the Bank of England, the latest LSEG data has markets only pricing in only 15 bps cuts through to year end. If this comes to fruition and we get two more rate cuts from the Fed, GBP/USD could be in for further gains as the year progresses.

Given that this is data dependent and ever evolving i would suggest caution and paying close attention to the data and rate cut expectations for both Central Banks moving forward.

US Data Ahead

The week draws to a close with some high impact US data which could stoke some volatility. Retail sales will give a glimpse to consumer demand but the bigger one could be the Michigan Consumer Sentiment data.

It will be interesting to see where survey respondents see inflation expectations over the 12 months in particular.

For all market-moving economic releases and events, see the MarketPulse Economic Calendar. (click to enlarge)

Technical Analysis - GBP/USD

GBP/USD has been on a tear since bottoming out on August 1, after the surprising jobs data.

The move higher has been swift as rate cut bets added further fuel to the rally. A sign of the momentum is evident in the fact that we have had one bearish day in the last 9 trading days.

The swing high at 1.3584 was a significant level which started the initial aggressive selling we saw in the last week of July.

Today it appeared as though GBP/USD was on its way to break this level which would have confirmed a change in character and put bulls firmly in charge.

The rejection has however proved to be a timely one, keeping the bearish trend intact.

The next move is however a mystery. Price is currently approaching the key pivot at the 1.3500 handle, with a candle close below opening up a retest of support at 1.3380.

A break above the 1.3584 handle brings the resistance handle around the 1.3700 handle into focus.

GBP/USD Daily Chart, August 14, 2025

Source: TradingView.com

Support

• 1.3500
• 1.3378
• 1.3200

Resistance

• 1.3584
• 1.3680
• 1.3750

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