GBP/USD Exchange Rate Forecast: Pound Holds Steady Despite US Credit Downgrade

Key Factors Influencing GBP/USD This Week

The Pound to US Dollar (GBP/USD) exchange rate remains subdued despite Moody’s recent US credit rating downgrade, with traders now turning their attention to UK inflation data for fresh direction.

UK Inflation in Focus – Will the BoE Delay Rate Cuts?

This week’s UK CPI inflation report (due Wednesday) is expected to show a rise in both headline and core inflation for April:

• Headline CPI forecast to jump to 3.3% (up from 2.6%)

• Core CPI predicted to climb to 3.6% (from 3.4%)

A hotter-than-expected reading could delay Bank of England (BoE) rate cut expectations, providing bullish momentum for the Pound (GBP).

US Dollar Weakness Persists After Moody’s Downgrade

The US Dollar (USD) extended losses after Moody’s cut the US credit rating from AAA to AA1, citing:

• Rising fiscal deficits

• Political instability

• Long-term debt concerns

With no major US economic data due Wednesday, Fed speeches will drive USD volatility. Any dovish signals could reinforce the bearish USD trend.

GBP/USD Exchange Rate Holds Firm

Despite the US downgrade, GBP/USD traded flat at $1.3377 as of Tuesday’s close.

Sterling found support from:

• Improved UK-EU trade relations (new deal easing post-Brexit friction)

• Hawkish BoE comments (Chief Economist Huw Pill warning against aggressive rate cuts)

Outlook: Will GBP/USD Break Higher?

If UK inflation surprises to the upside, GBP/USD could rally toward $1.35. However, Fed pushback on rate cuts may limit USD losses.

Key Levels to Watch:

• Resistance: $1.3400,$1.3450

• Support: $1.3350,$1.3300

For the latest forex updates and GBP/USD analysis, stay tuned to our market insights.