GBP/USD holds steady near 1.3700 as Bostic tempers Fed cut bets, solid UK GDP

• GBP/USD flat at 1.3707 as Bostic signals only one Fed cut in 2025 and three in 2026.
• UK GDP expands 0.7% QoQ in Q1, fastest in a year; signs of demand cooling emerge.
• US-UK trade deal takes effect; focus shifts to Powell and Bailey speeches on Tuesday.

GBP/USD is virtually unchanged during the North American session amid hawkish comments by Atlanta's Fed President Raphael Bostic, even though UK data revealed that the economy grew at its fastest pace in one year. At the moment, the pair trades at 1.3707, virtually unchanged.

Sterling shrugs off strong UK growth as hawkish Fed tone and Fed succession talk offset trade optimism

Market sentiment remains positive, despite speculation that US President Donald Trump may select the newest Fed Chair by September or October. This is undermining the Greenback, which, according to the US Dollar Index (DXY), has fallen 0.50% to 97.05. In the meantime, Raphael Bostic reiterated that he still expects the Fed to cut rates, but only once in 2025 and three times in 2026.

On the data front, the US economic docket revealed that the Chicago PMI for June deteriorated from 40.5 to 40.4, below forecasts of a slight improvement to 43, still at contractionary territory.

In the meantime, the trade deal between the US and the UK came into effect on Monday. The agreement lowered US tariffs on some industrial items from Britain.

Meanwhile, the UK's Gross Domestic Product (GDP) was in line with estimates, with Q1 2025 quarterly figures at 0.7% and yearly growth of 1.3%. Despite this, there are the first signs of softening demand, which could undermine the economy.

Regarding interest rate expectations, the Federal Reserve is projected to reduce rates by 64 basis points towards the end of the year. Across the pond, markets are pricing 50 bps of easing by the Bank of England (BoE) by December 2025.

On Tuesday, the UK docket will feature the speech by BoE Governor Andrew Bailey. In the US, traders will eye the ISM Manufacturing PMI and Fed Chair Jerome Powell's speech.

GBP/USD Price Forecast: Technical outlook

Consolidation is the name of the game, with GBP/USD finding strong support at 1.3700. Sellers are unable to drag the exchange rate lower and remain unable to clear the strong support at 1.3631, the June 13 high. Mixed readings of price action indicate that the trend is up; however, bullish momentum appears to be fading, as evidenced by the Relative Strength Index (RSI), which suggests that sideways trading is prevailing.

For a bullish continuation, GBP/USD needs to clear the previous YTD high of 1.3752, ahead of 1.3800. On the other hand, a break below 1.3600 exposes the 20-day SMA at 1.3569, followed by 1.3500 and the 50-day SMA at 1.3440.