The Pound Sterling (GBP) traded firmly against the US Dollar near 1.3400 on Tuesday. Investors remain cautious over how the Bank of England (BoE) will shape the monetary policy outlook under the influence of global economic tensions. Expectations that the BoE could cut interest rates in the May policy meeting supported the currency.
The UK’s own economic conditions add another layer of complexity. The cooler-than-expected UK Consumer Price Index (CPI) data for March signaled potential easing by the BoE. Inflation in the services sector grew moderately by 4.7% compared to a 5% increase in February.
BoE policymaker Megan Greene expressed concerns about persistent price pressures despite these moderate gains. In an interview with Bloomberg TV, Greene noted, “Tariffs actually represent more of a disinflationary risk than an inflationary risk.”
Market participants also anticipate a slowdown in job postings as London’s decision to increase employers’ contributions to social security schemes takes effect. All eyes are now on the upcoming preliminary S&P Global/CIPS Purchasing Managers’ Index (PMI) data for April and the UK Retail Sales data for March.
BoE monetary policy outlook evolution
The data will be published on Wednesday and Friday, respectively. The Pound Sterling maintains its resilience around a three-year high slightly above 1.3400 against the US Dollar on Tuesday.
The GBP/USD pair could witness more upside momentum. All short-to-long Exponential Moving Averages (EMAs) are trending higher. The 14-day Relative Strength Index (RSI) reaching overbought levels above 70.00 suggests strong bullish momentum.
However, investors should be prepared for potential corrections. Key resistance lies at the psychological level of 1.3500, while support can be found around the April 3 high near 1.3200. Investors are closely watching for any shifts in the UK’s economic data and BoE’s policy direction amid global economic uncertainties.
The interplay between domestic economic indicators and international policy decisions will likely continue to shape the performance of the Pound Sterling in the coming weeks.
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