20.07.202613:23 Forex Analysis & Reviews: GBP/USD: pivotal week for GBP

This is perhaps the most important week of July for the British currency. Over the next four days, the most significant macroeconomic releases for GBP will be published and will shape market expectations ahead of the Bank of England's July meeting. Tomorrow's UK labor market data will be followed by June inflation on Wednesday and retail sales figures on Friday. If published results deviate materially from forecasts, market expectations for the central bank could shift sharply, fueling heightened volatility in GBP/USD.

The labor market report is the first of three key releases ahead of the BoE meeting. Stronger-than-expected data may increase the case for a more cautious approach to easing policy, while evidence of further cooling would strengthen dovish pressure on the central bank.

Traders will focus on several components. Wage growth is foremost: the BoE views pay as a key indicator of persistent domestic inflationary pressure. Despite gradual cooling in the economy, wage growth remains elevated and well above rates consistent with a 2% inflation target. If average earnings including bonuses again beat forecasts (or show only modest slowing), that would bolster the argument for the BoE to delay policy easing at upcoming meetings.

Preliminary forecasts call for average weekly earnings including bonuses to rise to 4.5% year-on-year (from 4.4%), the highest reading since last November. Excluding bonuses, wages are expected to hold near the prior month at 3.4%.

Unemployment is forecast to remain at 4.9%, while claimant counts are expected to rise by 28,000—a sizable flow, slightly below May's 31.2k but still high. If, contrary to consensus, claimant growth falls to 10–7k, the pound would receive notable support, especially if pay readings are in the green.

On Wednesday, the market will get June CPI data. The headline CPI is forecast to slow to 2.7% year-on-year, the weakest since March last year after two months at 2.8%. Market attention will concentrate less on the headline number than on core inflation and, particularly, services inflation—metrics the BoE regards as the most reliable gauges of persistent domestic price pressure.

Core CPI is expected to moderate slightly to 2.5% from 2.6%. Services inflation came in at 3.6% in May, up from 3.4%; it is forecast to dip to 3.5% in June. If services inflation accelerates again, that would materially support the pound even if the headline CPI prints in the red.

Finally, on Friday, July 24, the UK will publish retail sales data for June. While this report typically exerts less market influence than employment or inflation, in the current environment it will help assess the resilience of consumer demand—a key driver of the UK economy.

May's retail report was strong, with sales rising 1.2% month-on-month after a drop in April, supported by warm weather, seasonal promotions, and stronger online activity. The consensus now expects a much more modest 0.2% monthly increase. Leading indicators nonetheless point to continued solid consumer activity in June—boosted by warm weather and the World Cup, which lifted online, hospitality, and leisure spending—so Friday's print could surprise to the upside and reinforce the view that domestic demand remains resilient, reducing urgency for rapid policy easing.

Nonetheless, the Friday release is unlikely to be a standalone driver for the pound. It will complement the broader fundamental picture if labor and inflation data resonate — i.e., surprise in the same direction. If all three releases confirm economic resilience, the probability of a more cautious BoE stance on easing would rise. If the data is uniformly weak, markets will gain fresh grounds to increase dovish expectations for the central bank.

Technically, GBP/USD on the daily chart sits between the middle and upper Bollinger Bands and trades above all Ichimoku lines, which show a bullish "parade of lines" signal. On the four-hour chart, the pair has failed for a second session to clear resistance at 1.3470 (the H4 middle Bollinger line). Consider long positions only once buyers secure a close above that resistance, which would open a path to the next barrier at 1.3550 (the H4 and D1 upper Bollinger line).