The pound edged up on Tuesday as investors abandoned the dollar hit by the ongoing trade war. The GBP/USD pair snapped a two-day losing streak, finding a technical bounce from the 200-day Exponential Moving Average just north of the 1.2700 handle. Price action remains uncertain ahead of the U.S.’s planned tariff implementation, with investors cautious as key U.S. inflation and sentiment figures are due later this week.
It remains a thin week overall on the UK side of the economic data docket, providing a welcome reprieve from the usual deluge of geopolitical and trade headlines. Several key policymakers from the Fed took the opportunity to caution that uncertainty and unwelcome inflationary impacts from U.S. tariffs will make it harder for the central bank to begin cutting rates. However, rate traders continue to pile into bets that the Fed will be squeezed into a rate-cutting cycle through the remainder of the year.
According to the CME’s FedWatch Tool, rate swap traders are beginning to price in hopeful bets that a first quarter-point cut may come as early as May.
Pound finds support amid uncertainty
The majority of the rate market still sees a 25 bps cut in July as more likely, with a total of 100 bps or more on the cards by the end of the year.
U.S. CPI inflation figures are slated for Thursday, with U.S. Producer Price Index (PPI) inflation and University of Michigan (UoM) Consumer Sentiment Index survey results set to publish on Friday. This will be the last blast of key U.S. inflation and sentiment figures from the ‘pre-tariff’ phase of 2025, marking a key measurement metric for the remainder of the calendar year. GBP/USD caught a bullish break on Tuesday, finding a thin bounce from the 200-day EMA just above 1.2700.
Bullish momentum remains borderline anemic, but bidding pressure was just enough to clip a two-day losing streak that saw Cable shed over 3% top-to-bottom. Bidders will still need to extend from the 200-day EMA before confirming a bullish recovery, but short momentum appears to have evaporated too quickly to allow fresh selling positions. The pound’s recovery comes as the UK seeks a new economic partnership with the United States amid rising tensions.
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