Pound Sterling edges up against the US Dollar ahead of key rate decisions from the Fed and Bank of England this week

The Pound Sterling (GBP) climbs toward 1.3285 against the US Dollar (USD) during European trading on Monday, recovering from a fresh weekly low near 1.3260 earlier in the session. The GBP/USD pair finds support as the US Dollar remains under pressure ahead of the Federal Reserve’s (Fed) monetary policy decision, scheduled for Wednesday.

Market participants, according to the CME FedWatch tool, largely expect the Fed to keep interest rates unchanged at 4.25%-4.50%. As such, attention shifts to the Fed’s forward guidance and commentary from Chair Jerome Powell for signals on future policy direction.

Fed officials have reiterated that any adjustments to interest rates will depend on signs of weakness in the labor market and the broader economy. However, stronger-than-expected US Nonfarm Payrolls data for April and a Q1 GDP decline driven by a surge in imports — rather than domestic weakness — have lessened the urgency for cuts.

Adding to the Fed’s caution is the persistence of elevated inflation expectations, as businesses raise prices to offset higher costs from increased import tariffs. This keeps upward pressure on consumer prices and complicates the case for easing monetary policy.

Meanwhile, US President Donald Trump continues to urge the Fed to lower interest rates, citing falling gasoline and food prices, strong employment, and tariff revenues. In a post on Truth Social, Trump argued there’s no inflation and called on the Fed to act. He also dismissed concerns about undermining the Fed’s independence, clarifying in a recent NBC News interview that he does not intend to fire Chair Jerome Powell, noting he can appoint a replacement soon.

Daily Digest Market Movers: Pound Sterling Mixed as UK Markets Pause for Early May Holiday

• The Pound Sterling is trading with a mixed tone on Monday in a subdued market environment, as UK financial markets remain closed in observance of the Early May bank holiday. Despite the quiet start, traders anticipate heightened volatility in the British currency this week, with the Bank of England (BoE) set to announce its interest rate decision on Thursday.
• Analysts at Bank of America (BofA) forecast that the BoE will lower interest rates by 25 basis points to 4.25%, with an 8-1 vote expected from the Monetary Policy Committee (MPC). BofA also anticipates that MPC member Swati Dhingra may advocate for a more aggressive 50 bps cut. The bank cites factors such as falling energy prices, easing domestic inflation, and potential economic risks stemming from US tariff policies under President Trump as justification for rate reductions. Looking ahead, BofA predicts two additional rate cuts from the BoE over the remainder of 2025.
• Globally, the Pound faces external pressure from unresolved US-China trade tensions. Over the weekend, US President Trump ruled out a meeting with Chinese President Xi Jinping this week and signaled that existing tariffs could be lowered eventually, though not immediately. “At some point, I’m going to lower them, because otherwise, you could never do business with them, and they want to do business very much,” Trump stated.

Technical Analysis: Pound Sterling Holds Above Key Support at 1.3260

On the technical front, the GBP/USD pair trades just above its weekly low of 1.3260, after pulling back from last week’s three-year high of 1.3445. The broader outlook remains bullish, with all short-, medium-, and long-term Exponential Moving Averages (EMAs) trending upward.

The 14-day Relative Strength Index (RSI) is attempting to climb back above the 60.00 level, which would signal a revival of bullish momentum.

Key resistance remains at the recent high of 1.3445, while immediate support is seen near the April 3 peak around 1.3200. A break above or below these levels could define the pair’s next directional move.