GBP/USD: Cable holds above 1.35000 as markets curb BoE rate cut bets

[Ben Graham]

Starting with a UK national holiday, coupled with a noticeably sparse UK economic calendar, the current trading week has been somewhat uneventful for cable traders.

Having only recently secured its best six-monthly performance since 2020, riding a wave of dollar downside, GBP/USD currently floats above the key level of 1.35000 and looks for daily support.

GBP/USD: Key takeaways from today’s session

• Happening some hours ago, a better-than-expected US GDP result introduced some immediate GBP/USD selling pressure as the dollar strengthened
  
• Otherwise, and following recent revelations surrounding the Bank of England and Federal Reserve monetary policy, cable downside remains somewhat limited
  

GBP/USD: Shifting Bank of England narrative offers cable support

In a few words, markets are currently readjusting expectations of further GBP rate cuts, with the latest reduction to 4% signifying the fifth rate cut made by the BoE in 2025.

This change in narrative is at least in part thanks to a series of hawkish economic data points, most significantly a major outperformance in services PMI and hotter-than-expected inflation as part of data released last week.

Read more on UK PMIs: UK Services PMI improves, pound continues losing streak

This, especially regarding the latter, might offer the Bank of England an opportunity to pause, or even end easing efforts, should they deem appropriate in their upcoming September decision.

While the recent vote ultimately concluded with a rate reduction, the room was noticeably split, again adding to the rationale that the Bank of England is becoming increasingly hawkish, having already cut several times in 2025.

At least one outcome of the above is immediate support for GBP/USD, which goes double when markets overwhelmingly predict a 25 basis point cut will be the Federal Reserve’s next move on September 17th.

GBP/USD: UK-US yield spread case-in-point for monetary policy expectation

While expectations that the Bank of England is changing its stance on monetary policy remain ever-intangible in the market aether, comparing the current direction of UK-US yield spreads offers more concrete evidence of a shifting narrative.

US 2-Year bond yield (US02Y), TVC, TradingView, 28/08/2025

Best explained by recent price action in 2Y treasuries, Monday saw UK 2Y sovereign bond yields meet their highest level since April, while its US counterpart has fallen to 3-month lows.

GBP/USD: US PCE inflation to offer finale to week 35

While this week’s trading has been nothing to write home about regarding UK economic events, the same cannot be said for the United States, set to end the week with the infamous PCE inflation report.

Revered as the Fed’s ‘preferred’ measure of inflation, the Federal Reserve will hope to see inflation at, or lower than, consensus, especially considering expectations of a 25 bps in the upcoming decision.

• Core PCE Expenditures Index (MoM), Friday 28th September 2025, 08:30 NYC
• Core PCE Expenditures Index (YoY), Friday 28th September 2025, 08:30 NYC
• PCE Expenditures Index (YoY), Friday 28th September 2025, 08:30 NYC
• PCE Expenditures Index (YoY), Friday 28th September 2025, 08:30 NYC

GBP/USD, OANDA, TradingView, 28/08/2025

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