BoE: The Bank of England has been one of the most cautious in pivoting. Inflation is still relatively sticky, especially in services and wages. Markets are pricing only 1–2 cuts by year-end.

Fed: While the Fed is on pause, softening labor and inflation data could open the door for easing in Q4 2025.

Impact: Monetary convergence or Fed-first easing may structurally benefit GBP.

The UK economy is stabilizing post-Brexit, and early signs of a productivity rebound and better business investment under a more stable Labour government are emerging.

Fiscal discipline remains challenging, but overall, the UK is no longer underperforming structurally versus Europe.

Impact: If Labour policies remain centrist and pro-business, UK growth could outperform Eurozone peers — a tailwind for GBP.

The recent Labour victory brought political clarity after years of instability. Markets welcomed the end of Brexit-related uncertainty and populist fiscal swings.

The U.S. faces an increasingly polarized election in late 2025. Trump’s re-election could bring dollar volatility and risk-off reactions depending on trade and Fed pressure.

Impact: Relative political stability in the UK adds to GBP's structural attractiveness.

UK’s current account remains in deficit, but is improving slightly due to better services exports and stable inward investment.

However, GBP’s global reserve currency status has diminished, and it remains vulnerable to external shocks.

Impact: Deficits remain a structural headwind but are not as dominant as in prior years.

Structural bias is to the upside for GBPUSD, especially if the BoE holds rates higher for longer while the Fed cuts.
However, near-term upside is capped around 1.35–1.37 unless we see a material USD weakness or a sharp improvement in UK macro data.

LONG GBPUSD

Jul 10 2025