24.07.202619:06 Forex Analysis & Reviews: GBP/USD – Smart Money Analysis: PMI Data Failed to Support the Pound

GBP/USD has posted strong gains in recent weeks, which may mark the beginning of a broader upward trend. However, bullish traders have currently paused their advance and are retreating. The ongoing corrective pullback could last for several weeks.

This week's fundamental backdrop for the pound has been mixed. The UK labour market data, including unemployment and wage growth, were generally supportive of the currency. By contrast, the inflation figures weighed on sentiment. UK inflation slowed more than market participants had expected, suggesting that the possibility of further monetary tightening by the Bank of England can largely be ruled out. Instead, attention may gradually shift toward the prospect of monetary easing later this year. It is worth recalling that, following the latest policy meeting, Andrew Bailey made it clear that the disinflation process remains on track and that consumer price inflation could return to the 2% target next year. The closer inflation moves toward the target, the greater the likelihood of an interest rate cut. Against this backdrop, the pound's decline this week appears to be a natural consequence of increasingly dovish market expectations. However, the renewed escalation in the Middle East has already pushed oil prices to around $100 per barrel. UK inflation cannot ignore this factor indefinitely.

The outlook for the FOMC is less straightforward. Initially, the market expected U.S. inflation to rise if the Federal Reserve refrained from tightening monetary policy. Later, inflation risks eased as oil prices fell to around $70 per barrel. This week, however, oil climbed back above $100, and the consequences of the renewed escalation in the Middle East, together with the blockade of the Strait of Hormuz, could drive prices toward $120 per barrel. If the situation develops according to the most pessimistic scenario, oil prices are likely to continue rising and surpass their March–May highs. In that case, hopes for slowing inflation in either the United States or the United Kingdom would become increasingly unrealistic. Conversely, under a more optimistic scenario, oil prices could return to the $60–70 per barrel range, reducing the need for further monetary tightening by the Federal Reserve. As a result, the U.S. dollar currently lacks firm support from expectations of a more hawkish Fed.

Technical analysis continues to indicate that the bullish trend could resume. The key question is from which price level. The market first swept liquidity below the April 6 low and then below the March 31 low. Therefore, there were solid technical reasons to anticipate a stronger pound in recent weeks. Given that the U.S. dollar still lacks convincing long-term bullish drivers and has already posted substantial gains in 2026, I believe sellers are unlikely to sustain further downside pressure. However, the pound's decline can currently be contained only by Imbalance 23, which has already acted as support twice before. Whether it will hold for a third time remains uncertain.

Friday's economic releases gave the pound an opportunity to recover, while traders looked for a bullish signal to form within Imbalance 23. The July Manufacturing PMI, Services PMI, and Composite PMI all exceeded market expectations. During the first half of the day, the pound did post modest gains, but buyers failed to build on the move. The UK PMI data were not ignored by the market, yet they proved largely ineffective in supporting the pound.

The broader fundamental backdrop still suggests that, over the long term, I expect the U.S. dollar to weaken rather than strengthen. Neither the conflict between Iran and the United States nor the possibility of a Federal Reserve rate hike in 2026 has altered that view. Geopolitical tensions temporarily reminded investors of the dollar's safe-haven status, but the most intense phase of the conflict has already passed. The Federal Reserve's intention to raise interest rates in 2026 is undoubtedly supportive for the dollar. However, tighter monetary policy would also slow economic activity and weaken the labour market. In addition, Kevin Warsh was appointed by Donald Trump to lead the FOMC with the expectation of pursuing a more accommodative monetary policy, something Jerome Powell was unwilling to deliver. Therefore, in my view, any appreciation of the U.S. dollar is likely to be temporary rather than the beginning of a lasting trend.

Economic Calendar

United States

• Durable Goods Orders (12:30 UTC)

The economic calendar for July 26 contains only one notable release, which may either support the U.S. dollar or have little impact on the broader market. Consequently, economic data are unlikely to significantly influence market sentiment on Monday, and any effect should be limited to the second half of the trading day.

GBP/USD Forecast and Trading Tips

The long-term outlook for GBP/USD remains bullish. Following the liquidity sweeps below the two most recent swing lows, buyers regained control of the market. Nevertheless, the pound could still extend its correction toward 1.3007, the level that would invalidate the current bullish trend. Such a move, however, would require fresh bearish signals, which have yet to emerge.

For buyers, Imbalance 23 remains the primary support zone and could trigger another bullish reaction for the third time. For sellers, the key level is 1.3392–1.3415, where Bearish Imbalance 24 is located. For now, the appropriate approach is to monitor price action and wait for confirmed trading signals before entering the market.