The GBP/USD currency pair remained largely unchanged above the 1.3500 level on Thursday, as traders digested mixed economic signals from both the United Kingdom (UK) and the United States (US). During Asian hours, the pair traded around 1.3520, marking little movement for the second consecutive day. 

The muted action comes after the release of the latest RICS Housing Price Balance report, which indicated a sharper-than-expected decline in UK housing market activity, highlighting persistent pressures in the property sector. The brokers at Arbitics outline the most important details of the subject in this article.

UK Housing Market Weakness

The UK RICS Housing Price Balance fell to -19% in August, its lowest level in nearly two years, down from -13% in July. Analysts had expected a smaller drop to -10%, making the actual figure worse than anticipated. The reading underscores ongoing subdued buyer demand and continued downward pressure on housing prices.

This decline in the housing market signals broader concerns about UK economic momentum, as housing often serves as an early indicator of consumer confidence and spending power. Despite this weakness, the Pound Sterling (GBP) has held steady against major currencies, reflecting market expectations that the Bank of England (BoE) will maintain interest rates at 4% during its September monetary policy meeting.

UK Economic Outlook: GDP and Rate Expectations

Market participants are now turning attention to the upcoming UK GDP data, set to be released on Friday. Economists forecast stagnant monthly growth, following a 0.4% increase in June, suggesting a slowing economic momentum.

If GDP data confirms weaker growth, this could reinforce expectations for further BoE rate cuts later in 2025. Such a development would likely stabilize GBP/USD, as markets price in a gradual monetary easing approach rather than a sudden policy shift. 

Traders are particularly focused on these figures, as any deviation from forecasts could generate short-term GBP volatility and influence broader market sentiment.

US Dollar Faces Potential Headwinds

Across the Atlantic, the US Dollar (USD) faces pressure following softer-than-expected US Producer Price Index (PPI) data. The CME FedWatch tool indicates that markets are fully pricing in a 25-basis-point (bps) rate cut at the Federal Reserve (Fed) September meeting, driven by weaker inflation metrics and increased expectations for monetary easing.

Investors remain attentive to US economic indicators, as a softer USD could support GBP/USD upside, while stronger data could prompt a retracement. The market continues to weigh these opposing forces, contributing to the current range-bound trading environment.

CPI Data in Focus

All eyes now shift to the August US Consumer Price Index (CPI), due later today, as a crucial determinant for USD performance. The headline CPI is forecasted to rise 2.9% year-over-year (YoY), while the core CPI, which excludes volatile food and energy prices, is projected to increase 3.1% YoY.

Should the CPI numbers exceed expectations, markets could price in a larger 50-bps Fed rate cut, increasing USD depreciation and potentially driving GBP/USD higher. 

Conversely, a softer CPI reading could reinforce a more cautious Fed easing stance, keeping the pair confined to its 1.3500–1.3550 range. Traders will closely monitor the release for signs of potential market-moving volatility.

Technical Outlook for GBP/USD

From a technical perspective, GBP/USD remains in consolidation above the 1.3500 psychological level, reflecting a delicate balance between bearish UK housing data and anticipated USD weakness. Short-term traders are watching support near 1.3480 and resistance around 1.3550, while breakout moves could be triggered by either the UK GDP report or the US CPI release.

The pair’s narrow trading range over the past two sessions indicates a market awaiting fresh catalysts. Any unexpected deviation from economic forecasts could prompt a sharp intraday reaction, particularly as speculative positions in currency futures and options remain elevated.

Market Sentiment and Positioning

Current market sentiment is cautious, as traders await the key economic releases that may influence short-term GBP/USD direction. The GBP benefits from BoE rate stability expectations, while the USD remains sensitive to Fed policy developments amid mixed inflation readings.

Market positioning suggests that investors are hedging against potential volatility, while range-bound trading continues to dominate. This setup reflects a market in wait-and-see mode, with investors balancing risks between UK housing weakness and US monetary policy signals.

Conclusion

In summary, GBP/USD remains muted above 1.3500, supported by BoE rate stability expectations and tempered by weaker UK housing market data. The pair’s limited movement reflects a market balancing act, weighing subdued UK economic performance against potential USD depreciation amid Fed easing expectations.

Traders will closely monitor Friday’s UK GDP release and the August US CPI figures, which could define the short-term trajectory for GBP/USD. Until then, the pair is expected to trade in a narrow range, with 1.3480 support and 1.3550 resistance acting as critical technical levels.