British pound dips as BoE keeps rates steady amid growing trade risks
GBP/USD faces resistance at 1.3000 after BoE holds rates steady amid trade policy concerns
The British pound retreated slightly below the $1.30 mark after touching a four-month-high, as the Bank of England (BoE) kept its benchmark interest rate at 4.5% and reiterated a gradual approach to easing monetary policy. Despite cooling inflation, the central bank signaled that higher borrowing costs may persist longer due to ongoing economic uncertainties and trade policy risks.
At the same time, U.S. tariffs on key imports have raised concerns over potential inflationary pressures, which could complicate central banks’ monetary policy outlook. Investors closely monitored fresh UK labor market data, with the unemployment rate holding at 4.4%, while wage growth moderated to 5.8%, aligning with expectations. The Federal Reserve also left its benchmark rate unchanged, sticking to its forecast of two interest rate cuts later this year.
GBP/USD price dynamics (Feb 2025 - Mar 2025) Source: TradingView.
BoE’s cautious stance and economic risks
The BoE's decision to keep rates steady was widely expected, with eight out of nine Monetary Policy Committee (MPC) members voting to hold rates, while one dissenter supported a 25-basis-point cut. Governor Andrew Bailey reaffirmed that monetary policy is on a gradually declining path, suggesting that rate cuts could be slower than market expectations.
Meanwhile, the latest employment data showed UK job growth slowed to 144K new positions, compared to 107K in the previous three months. Wage growth, a key driver of inflation, remained strong at 5.9% but showed signs of softening, reinforcing expectations that BoE policymakers will closely monitor labor market conditions before committing to rate reductions.
The UK government’s decision to increase National Insurance (NI) contributions for employers from 13.8% to 15% in April has also sparked concerns about potential hiring slowdowns. Businesses are reportedly considering freezing hiring plans, which could weaken labor market resilience in the coming months.
Technical outlook: GBP/USD faces resistance at 1.3000
Pound sterling has held onto gains against the U.S. dollar, but the latest pullback suggests profit-taking near the key psychological level of 1.3000. Technical indicators remain bullish, with the 20-day and 50-day exponential moving averages (EMAs) at 1.2850 and 1.2705, respectively, offering strong support.
The Relative Strength Index (RSI), which had reached overbought territory above 70.00, has now cooled toward 60.00, signaling a potential resumption of the upside trend. If GBP/USD sustains a move above 1.3000, the next resistance lies at 1.3100, the October 15 high. However, a failure to hold above this level could see a retracement toward 1.2770, aligning with the 50% Fibonacci retracement level.
Historically, GBP/USD’s ability to hold above the 1.3000 level has signaled strong bullish momentum, driven by monetary policy expectations and external economic factors. As discussed in previous analyses, the BoE’s guidance on inflation and labor market conditions plays a crucial role in shaping the pound’s direction. Additionally, global trade risks, particularly those related to U.S.-EU tariffs and economic policies, have added volatility to GBP/USD movements.
