The British Pound (GBP) edged higher to around 1.3285 against the US Dollar (USD) during European trading hours on Monday, recovering from an earlier dip to 1.3260. This modest rebound
comes as the US Dollar weakens ahead of a pivotal week for central bank policy decisions, with the Federal Reserve (Fed) and the Bank of England (BoE) both set to make announcements.
Fed Expected to Hold Rates Steady
Markets widely anticipate that the Fed will maintain interest rates within the 4.25%–4.50% range at Wednesday’s policy meeting. According to the CME FedWatch Tool, a rate pause is nearly fully priced in. However, the key focus will be on the Fed’s forward guidance and commentary from Chair Jerome Powell regarding the outlook for the remainder of the year.
While recent US job and GDP data have shown resilience—April’s Nonfarm Payrolls beat expectations, and Q1 GDP was stronger once adjusted for import growth—Fed officials remain cautious. They have signaled that any shift in policy would depend on signs of economic softening, particularly in the labor market.
A major constraint on potential rate cuts is persistent inflation expectations. With businesses passing on higher import costs to consumers, price pressures remain elevated. This makes any dovish pivot from the Fed less likely in the short term.
Despite this, former President Donald Trump continues to push for lower rates, arguing on Truth Social that falling prices at the pump and grocery stores, coupled with strong employment, support rate cuts. He also reiterated that he has no plans to remove Fed Chair Powell, stating, “Why would I do that? I get to replace the person in another short period of time.”
BoE Likely to Cut Rates This Week
Back in the UK, the Pound is trading mixed amid thin volume due to the Early May bank holiday. Nonetheless, traders are bracing for volatility ahead of Thursday’s BoE decision.
Analysts at Bank of America (BofA) expect a 25 basis point cut, bringing the rate to 4.25%, with an 8-1 majority vote anticipated. Committee member Swati Dhingra is forecasted to push for a more aggressive 50 bps cut. BofA cites falling energy prices, moderating inflation, and potential fallout from US tariffs as justification for easing policy. The bank also predicts two more cuts later in the year, excluding Thursday’s expected move.
Global Risks: US-China Tensions Linger
On the international front, ongoing uncertainty in US-China trade relations is likely to weigh on both the Pound and broader UK market sentiment. Over the weekend, Trump confirmed he won’t speak with Chinese President Xi Jinping this week but hinted at a future reduction in tariffs. “At some point, I’m going to lower them… they want to do business very much,” he remarked.
Technical Outlook: Support and Resistance Levels in Focus
Technically, GBP/USD remains just above the weekly low of 1.3260, having pulled back from last week’s three-year high of 1.3445. The pair retains a bullish bias, supported by rising short-to-long term Exponential Moving Averages (EMAs).
The 14-day Relative Strength Index (RSI) is attempting to climb back above 60.00, which could signal renewed upside momentum. On the upside, resistance is seen at the 1.3445 high, while key support lies around the April 3 level of 1.3200.