GBP/USD is the price of one pound in dollars, and like any price it is set by supply and demand. The useful question is what changes that balance. The drivers below are listed roughly in order of how much they matter over the medium term.
1. Interest rates and central-bank policy
The biggest single driver is the gap between Bank of England and Federal Reserve policy. Money flows toward the currency offering the better risk-adjusted return, so when UK rates rise relative to US rates the pound tends to firm, and vice-versa. Crucially, markets trade the expected path of rates, so a decision that is already priced in may cause no move at all — it is the surprise that counts. See our interest-rate comparison.
2. Inflation
Inflation data (UK CPI, US CPI and PCE) drives rate expectations, so a hot or cold inflation print often moves Cable sharply within minutes. Higher-than-expected inflation usually lifts a currency short-term by implying tighter policy, even though it erodes purchasing power over the long run.
3. Growth and the data calendar
GDP releases, the monthly US jobs report (non-farm payrolls), retail sales, and business surveys (PMIs) all shift the relative growth outlook. Strong US data tends to support the dollar; strong UK data tends to support the pound. The US jobs report is consistently one of the most market-moving events of the month for every dollar pair, Cable included.
4. Risk sentiment and the dollar’s safe-haven status
The dollar is the world’s reserve and safe-haven currency. When markets are frightened — a banking scare, a geopolitical shock, a sell-off in stocks — investors buy dollars regardless of where the trouble started. The pound, by contrast, is a more cyclical, “risk-on” currency. So GBP/USD often falls during global stress even when nothing has changed in the UK. This single dynamic explains a large share of Cable’s sharpest moves.
5. Politics and policy credibility
Elections, budgets, referendums and shifts in fiscal credibility can move the pound hard, as Brexit in 2016 and the 2022 mini-budget both showed. Markets dislike uncertainty and unfunded promises; perceived fiscal recklessness tends to weaken a currency quickly.
6. Trade and capital flows
The UK runs a persistent current-account deficit and depends on foreign capital inflows, which makes the pound sensitive to changes in investor appetite for UK assets. Large structural flows — investment, dividends, cross-border M&A — sit beneath the daily noise and shape the longer-term trend.
Putting it together
On any given day, Cable is the net result of all these forces at once. A useful habit is to ask two questions about every move: is this a pound story or a dollar story? (watch the dollar index and EUR/USD to tell them apart), and was this a surprise versus what the market expected? Those two questions explain most of what GBP/USD does.