The USD/GBP exchange rate closed the week modestly higher around 0.7478, reflecting a period of consolidation after midweek volatility. Currency markets remained sensitive to central bank signaling and incoming economic data, with investors reluctant to take strong positions ahead of clearer guidance on monetary policy trajectories.

Dollar Support from Policy Caution

The U.S. dollar retained underlying support during the week as investors reassessed the timing and pace of potential Fed interest rate cuts. While expectations for easing in 2025 remain broadly priced in, recent U.S. data suggested that inflation progress may be uneven. This reinforced a “higher for longer” narrative, lending stability to the dollar against major peers, including sterling. As a result, USD/GBP stayed comfortably above recent lows, even as upside momentum remained contained.

Sterling Weighed by Domestic Uncertainty

On the UK side, the British pound faced headwinds from mixed economic signals and ongoing uncertainty surrounding the BoE’s policy outlook. Inflation has eased from its peak but remains above target, complicating the central bank’s path toward eventual easing. At the same time, softer growth indicators and subdued consumer activity limited enthusiasm for the currency. These crosscurrents contributed to choppy price action, with sterling struggling to capitalize on periods of broader dollar softness.

Global Context and Market Positioning

Broader market conditions also played a role in shaping the week’s trading pattern. Episodes of cautious risk sentiment supported the dollar, while brief improvements in global equity markets provided only limited relief for the pound. For Israeli and global investors monitoring currency exposure, the USD/GBP pair continues to reflect a balance between relative growth prospects and policy credibility. The week’s narrow range suggests positioning remains light, with markets waiting for clearer catalysts before committing to a sustained trend.

Looking ahead, attention will focus on upcoming U.S. inflation and labor market data, alongside key UK releases that could influence expectations for the BoE’s next steps. Any shift in guidance from policymakers, or a meaningful surprise in macro data, could prompt a break from the current consolidation. Until then, USD/GBP is likely to remain sensitive to short-term sentiment swings, with volatility driven more by data surprises than by structural changes in outlook.