The Pound Sterling (GBP) has made a notable recovery against the US Dollar (USD), bouncing back to near 1.2935 in Thursday’s London session after briefly hitting an 11-week low of 1.2830 earlier in the week. This rebound follows a slight correction in the US Dollar, which had surged following Donald Trump’s landslide victory in the US presidential elections. Traders reacted positively to Trump’s promises of higher tariffs and lower corporate taxes, which are expected to boost domestic output and investments, thereby supporting the Greenback.
As traders digest the implications of Trump’s victory, the spotlight shifts to two key central bank meetings—the Federal Reserve (Fed) and the Bank of England (BoE)—both of which are expected to cut interest rates by 25 basis points (bps). The Fed’s policy decision, set for 19:00 GMT, is highly anticipated as officials are widely expected to lower the benchmark interest rate to the 4.50%-4.75% range. With inflationary pressures possibly escalating due to Trump’s policies, investors are keen to see how the Fed adjusts its stance to balance economic growth and price stability.
Similarly, the BoE’s decision, scheduled for 12:00 GMT, will also be in focus. The UK central bank is likely to reduce its interest rates by 25 bps to 4.75%, marking the second rate cut this year. The BoE’s decision is influenced by the ongoing inflation outlook in the UK, with some economists predicting that tariff hikes under Trump’s administration could significantly impact the UK economy. The National Institute of Economic and Social Research (NIESR) suggests that the UK’s growth rate could slow drastically to 0.4% if these tariffs are implemented.
Pound Sterling’s technical outlook suggests a cautious near-term trend. The GBP/USD pair remains above the 200-day Exponential Moving Average (EMA) around 1.2860, but faces resistance at the 20-day and 50-day EMAs, which are in a downward trajectory near 1.2990 and 1.3030, respectively. The pair’s Relative Strength Index (RSI) is hovering around 40, indicating a bearish momentum could resume unless the GBP can hold above the critical 1.2800 support level.
Also read : Bank Of England Set For 25bps Rate Cut- What It Means For GBP/USD, Key Support At 1.2811
Investors are also closely watching BoE Governor Andrew Bailey’s press conference following the rate decision. His remarks on the inflationary outlook, especially in light of the potential tariff hikes by the new US administration, will be critical in shaping market expectations for the pound.
As central banks navigate a shifting global economic landscape, the Pound Sterling faces a delicate balancing act—contending with potential US tariff impacts while responding to domestic inflationary pressures. With markets predicting that both the Fed and BoE will take a more dovish stance, the economic policy trajectory will be crucial in shaping the currency outlook in the coming months.
