Sterling price holds firm as BoE rate cut bets grow after inflation surprise
Pound steadies near $1.34 as softer inflation strengthens BoE rate cut outlook for May
Sterling edged higher on Tuesday, trading near $1.3392 against the U.S. dollar, after extending its gains in April amid growing expectations that the Bank of England (BoE) is on track to cut interest rates at its May policy meeting. The move comes on the back of softer-than-expected UK inflation data and continued global uncertainty driven by protectionist trade policies from the United States.
UK Consumer Price Index (CPI) figures for March surprised to the downside across all key measures, with headline inflation falling to 2.6% year-on-year and services inflation easing to 4.7%. The figures were below consensus expectations and also fell short of the BoE’s own projections. Danske Bank analysts believe the disinflation trend, coupled with easing price pressures, increases the likelihood that the central bank will deliver its next 25 basis point cut in May, continuing a quarterly pace of easing.
GBP/USD price dynamics (March 2025 - April 2025) Source: TradingView.
Trade policy headwinds cloud growth outlook
The BoE’s Financial Policy Committee recently flagged global trade realignments as a threat to financial stability. The concerns were echoed by BoE policymaker Megan Greene, who said Trump’s tariffs present more of a disinflationary risk than an inflationary one. Market sentiment remains mixed as UK traders brace for volatility ahead of key data releases this week, including the S&P Global/CIPS PMI on Wednesday and March retail sales on Friday.
The GBP/USD pair continues to trade within an ascending channel, supported by the 50-day EMA at $1.3304. Immediate resistance lies at $1.3448, with the next hurdle at $1.3498. A breakout above this level could fuel the next leg up toward the $1.36 mark. On the downside, $1.3366 and $1.3302 serve as immediate support zones. Momentum remains with the bulls for now, but a pullback cannot be ruled out if risk sentiment deteriorates.
In prior reports, we noted Sterling's firm bullish structure, supported by robust technical patterns and improving macro resilience. With inflation softening and the BoE signaling readiness to act, traders now await official confirmation in May’s meeting.
