- GBP/USD gains traction to around 1.3195 in Tuesday’s early European session.
- Gradual and careful policy-easing approach by the BOE supports the GBP.
- The UK employment and US CPI inflation reports will be in the spotlight later on Tuesday.
The GBP/USD pair is exhibiting upward momentum, trading near the 1.3195 level during the early hours of the European trading session on Tuesday. The Pound Sterling (GBP) is demonstrating strength against the US Dollar, buoyed by recent positive developments concerning trade relations between the United States and the United Kingdom. Market participants are keenly awaiting the release of key economic data later today, specifically the UK employment figures and the US Consumer Price Index (CPI) inflation report, which are expected to provide further direction for the currency pair.
Last week, US President Donald Trump announced the continuation of a 10% tariff on the majority of British goods imported into the United States. However, in a move perceived as a conciliatory gesture, the President also indicated a reduction in the previously higher tariffs imposed on imports of British automobiles, steel, and aluminum. These developments surrounding the trade agreement between the US and the UK have contributed to a more favorable outlook for the Cable (GBP/USD). The revised tariff structure is anticipated to alleviate some of the pressure on British exporters and foster greater trade activity between the two nations.
Furthermore, the Bank of England’s (BOE) measured and deliberate approach to monetary policy easing is providing additional support to the GBP. At its most recent meeting, the UK central bank opted to reduce interest rates by 25 basis points, a decision that was not unanimous among policymakers. This cautious approach signals the BOE’s assessment that while global trade tensions, particularly those stemming from US trade policies, pose risks to economic growth, they have not fundamentally altered the bank’s strategy of gradual policy adjustments. Concurrently, the BoE revised its forecast for UK economic growth upwards, projecting a 1% expansion, a notable increase from the 0.75% growth rate predicted in the February meeting. This improved outlook reflects a degree of resilience in the UK economy despite the prevailing global uncertainties and suggests a more optimistic trajectory for the Pound Sterling. Investors will be closely monitoring upcoming economic releases and statements from BOE officials for further clues regarding the future direction of monetary policy.
