Pound Sterling exhibits mixed performance as traders await the release of the flash UK PMI data

The Pound Sterling (GBP) displays a mixed performance against major peers on Tuesday as investors remain cautious regarding the Bank of England’s (BoE) monetary policy outlook amidst the impact of President Trump’s international trade policies.

With ongoing global economic tensions, traders are increasingly betting on a potential interest rate cut by the BoE in May. Despite the possibility of the UK securing a trade deal with the US after Trump’s administration imposed 10% reciprocal tariffs and 25% levies on steel and foreign cars, the UK faces intense competition from other nations. Trump’s protectionist policies are expected to push trading partners to sell their goods at lower prices in alternative markets, further complicating the UK’s position.

In its April Financial Policy Committee (FPC) meeting, the BoE warned that significant shifts in “global trading arrangements” could undermine “financial stability by depressing growth.”

Additionally, softer-than-expected UK Consumer Price Index (CPI) data for March has fueled speculation that the BoE may reduce borrowing rates in May. The services sector inflation, closely watched by the BoE, grew at a moderate pace of 4.7%, compared to 5% in February.

BoE policymaker Megan Greene expressed concerns about persistent service inflation in an interview with Bloomberg TV. She also noted that Trump’s tariffs pose a “disinflationary risk” rather than an inflationary one. Greene dismissed the likelihood of a significant labor market shakeout, despite market expectations of a slowdown in job postings due to London's increased social security contributions.

This week, investors are focused on the release of the preliminary S&P Global/CIPS Purchasing Managers' Index (PMI) data for April and the UK Retail Sales data for March, set to be released on Wednesday and Friday, respectively.

Daily Digest Market Movers: Pound Sterling Holds Strong Against US Dollar

• The Pound Sterling remains robust, trading near a three-year high above 1.3400 against the US Dollar (USD) during Tuesday's European session. The GBP/USD pair is poised for further gains as the US Dollar continues to weaken amid US President Donald Trump’s ongoing attacks on the Federal Reserve’s (Fed) independence for not cutting interest rates.
• The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, is searching for temporary support after reaching a fresh three-year low near 98.00.
• On Monday, Trump once again criticized Fed Chair Jerome Powell for sticking with a “wait and see” approach on interest rates, warning that the economy could suffer if monetary policy is not eased. “There can be a SLOWING of the economy unless Mr. Too Late, a major loser, lowers interest rates, NOW,” Trump posted on TruthSocial.
• Trump also renewed his threat to remove Powell from his position last week, declaring, “I am not happy with him. If I want him out of there, he’ll be out real fast, believe me.” This attack on the Fed’s autonomy prompted investors to question the safe-haven status of the US Dollar, which had already been under pressure due to Trump’s volatile tariff policies. His imposition of harsh reciprocal tariffs, followed by a surprise 90-day pause, further fueled doubts about the consistency of his policy objectives, weighing on the US Dollar and US assets.

Technical Analysis: Pound Sterling Holds Near 1.3400

The Pound Sterling revisits its three-year high above 1.3400 against the US Dollar on Tuesday. With short-to-long Exponential Moving Averages (EMAs) all sloping higher, the GBP/USD pair is likely to see further upward movement.

The 14-day Relative Strength Index (RSI) has reached overbought levels above 70.00, signaling strong bullish momentum, though a potential correction may be on the horizon.

To the upside, the psychological level of 1.3500 stands as a key resistance point. On the downside, the April 3 high around 1.3200 will serve as an important support level.