Pound steadies above $1.29 as UK PMI data offsets Fed caution and tariff uncertainty
GBP/USD nears 1.295 on PMI boost as traders await UK Spring Statement and Trump tariff update
The British pound held steady near $1.2920 during Tuesday’s Asian session, maintaining its gains from the previous day as strong UK PMI data provided support despite global macroeconomic uncertainties. The latest figures from the UK services sector revealed robust expansion, with renewed demand in financial and consumer services signaling a broader economic recovery.
As a result, traders now price in a 60% probability of a quarter-point rate cut by the Bank of England (BoE) in May—down from earlier expectations of more aggressive monetary easing. HSBC has also revised its expectations, forecasting the BoE's base rate to reach 3% by the third quarter of 2026.
The upward movement pushed GBP/USD to an intraday high of $1.295, nearing the over four-month peak of $1.30 touched last week. Despite looming political and trade-related risks, such as U.S. tariff uncertainty and the upcoming UK Spring Statement, investor sentiment toward the pound remained cautiously optimistic.
GBP/USD price dynamics (Jan 2025 - Mar 2025) Source: TradingView.
Dollar weakens as Fed signals caution, inflation concerns linger
Meanwhile, the U.S. dollar weakened modestly, contributing to the pound’s relative strength. The dollar came under pressure following remarks from Atlanta Federal Reserve President Raphael Bostic, who warned of persistent economic uncertainty and slower-than-expected progress on inflation. Bostic revised his expectations for rate cuts, aligning with the Fed’s broader stance of two reductions this year, though he emphasized trade-related risks, particularly ahead of U.S. President Donald Trump’s April 2 tariff announcement.
Adding to the dollar’s retreat, the S&P Global Services PMI surged to 54.3 in March—up from 51.0 in February and surpassing market expectations—signaling resilience in the U.S. economy. Yet, traders viewed this data in the broader context of ongoing global risks, including Trump’s trade policies and their potential inflationary consequences.
Outlook: Key UK event risk looms
Looking ahead, markets are eyeing UK Chancellor Rachel Reeves’ Spring Statement on Wednesday for insights into the fiscal outlook and economic priorities of the Starmer-led government. While GBP/USD remains supported above 1.29, any dovish policy cues from the BoE or a shift in market sentiment due to trade policy developments could alter its trajectory. Until then, the pair continues to benefit from the relatively more hawkish BoE stance and recent economic outperformance.
As we’ve noted in earlier coverage, GBP/USD continues to mirror diverging central bank policies, with the Bank of England’s cautious path toward rate cuts contrasting the Fed’s shifting stance amid tariff-driven uncertainty. Key resistance remains near 1.30, while traders eye UK inflation updates and U.S. macro data for the next directional cues.
