GBP/USD rises sharply as traders price in Bank of England rate cut and Federal Reserve pause.
The British Pound Sterling (GBP) continued its upward momentum on Tuesday, climbing close to 1.3400 against the US Dollar (USD) during North American trading hours. The sharp appreciation in the GBP/USD pair comes as investors brace for major monetary policy decisions from both the Federal Reserve and the Bank of England (BoE) this week.
Fed Expected to Hold; BoE Poised to Cut Rates
According to the CME FedWatch Tool, the Federal Reserve is widely expected to maintain interest rates within the 4.25%–4.50% range at Wednesday’s policy meeting. This would mark the third consecutive meeting with no change in rates, as Fed officials continue to favor a “wait and see” approach amid tariff-related economic uncertainties under the Trump administration.
In contrast, the Bank of England is expected to announce a 25 basis point rate cut on Thursday, bringing the benchmark rate down to 4.25%. This would be the fourth consecutive rate cut in the current easing cycle that began in August.
Analysts from the Commonwealth Bank of Australia noted that the BoE may signal a more aggressive easing path and revise its GDP growth forecasts downward in response to rising global trade tensions and inflationary pressures caused by President Trump’s new 100% tariffs.
GBP/USD Technical Analysis: Bullish Momentum Builds
Technically, the GBP/USD pair is pushing toward a three-year high of 1.3445, supported by bullish short-to-long-term Exponential Moving Averages (EMAs).
- Support Levels: 1.3200 (April 3 high)
- Resistance Levels: 1.3445 (multi-year high)
- RSI Outlook: The 14-day Relative Strength Index (RSI) is hovering below 60.00. A breakout above this level may signal renewed bullish strength.
Currency Heatmap: USD Weakness Supports GBP Gains
The US Dollar was broadly weaker on Tuesday, falling against major currencies. The US Dollar Index (DXY) dropped below 99.50, reflecting market caution ahead of the Fed’s rate decision.
| Currency | Change vs USD |
|---|---|
| GBP | +0.71% |
| JPY | +0.74% |
| EUR | +0.23% |
| CAD | +0.20% |
Market Outlook: Tariff Risks and Rate Path Clarity in Focus
- In the UK, attention is on the BoE’s forward guidance. Any signal of faster rate cuts could impact GBP direction.
- In the US, President Trump’s aggressive trade policy has sparked concerns of stagflation—a mix of high inflation and slowing growth.
- However, US Treasury Secretary Scott Bessent maintains an optimistic stance, suggesting trade deals with 17 countries (excluding China) are close.
Conclusion
The Pound Sterling’s rally is fueled by diverging central bank paths, broad US Dollar weakness, and geopolitical trade tensions. If the BoE signals deeper policy easing while the Fed holds steady, GBP/USD could retest 1.3445, with a breakout opening the path toward new multi-year highs.
Stay Updates with Daily Forex Pakistan.