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The Pound Sterling gains ground ahead of major central bank announcements this week.
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The Bank of England is expected to cut rates on Thursday, with markets anticipating signals of a faster pace of easing and downgraded GDP growth forecasts.
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The Federal Reserve is widely expected to hold interest rates steady at Wednesday’s meeting.
The Pound Sterling (GBP) climbs toward 1.3390 against the US Dollar (USD) in North American trading on Tuesday, as the GBP/USD pair benefits from a weakening Greenback ahead of the Federal Reserve’s policy announcement on Wednesday. The US Dollar Index (DXY), which measures the Dollar against a basket of six major currencies, dips below 99.50.
Market expectations remain firm that the Fed will hold interest rates steady at 4.25%–4.50% for a third consecutive meeting, according to the CME FedWatch Tool. Traders are increasingly confident in a pause, as Fed officials continue to favor a “wait and see” stance amid lingering uncertainty over the U.S. economic outlook under President Trump’s administration.
Daily Digest: Pound Sterling Outperforms Across the Board
- The Pound Sterling is trading strongly against its major counterparts on Tuesday, bolstered by anticipation ahead of the Bank of England (BoE) interest rate decision on Thursday. The BoE is expected to cut rates by 25 basis points (bps) to 4.25%, marking the fourth rate cut in its current monetary policy cycle, which began in August.
- Investors will be keenly focused on the BoE’s guidance regarding its monetary policy and the broader economic outlook, particularly in light of the recent tariff hikes imposed by U.S. President Donald Trump on April 2. In the March policy meeting, the BoE adopted a gradual rate-cut approach, though it did not factor in the risks of the ongoing trade war, a concern Governor Andrew Bailey addressed in late April.
- Market participants predict that the BoE could shift away from its gradual easing stance, potentially lowering its growth forecasts due to the trade tensions. Analysts at Commonwealth Bank of Australia anticipate that the BoE may revise its GDP projections downward and possibly abandon the "gradual" rate-cut strategy.
- In the U.S., market experts have raised concerns that President Trump's new economic policies—particularly higher tariffs—could hurt the economy, leading to slower growth and a rise in consumer inflation. The Wall Street Journal reports that the risk of stagflation could increase due to trade-related cost increases and supply chain disruptions.
- However, U.S. Treasury Secretary Scott Bessent remains confident that the tariff policy will boost economic growth and help reduce the trade deficit. Bessent also expressed optimism about reaching several trade deals with key partners, excluding China, in the near future. He expects substantial progress on U.S.-China trade talks in the coming weeks.
Technical Analysis: Pound Sterling Maintains Bullish Outlook
The Pound Sterling rises to near 1.3400 against the U.S. Dollar on Tuesday, with the pair eyeing a potential test of the three-year high at 1.3445. The overall trend remains bullish, with all short- to long-term Exponential Moving Averages (EMAs) pointing upward.
The 14-day Relative Strength Index (RSI) remains below 60.00 but could signal fresh bullish momentum if it rises above this level.
On the upside, the 1.3445 high remains a key resistance level. On the downside, the April 3 high around 1.3200 will act as major support.
