GBP/USD price struggles as BoE rate cut expectations weigh on sentiment
The British pound faces downside risks as BoE rate cuts
The British pound remains under pressure, trading near $1.242, as investors brace for the Bank of England’s (BoE) interest rate decision on Thursday. Markets widely expect the central bank to lower its key borrowing rate by 25 basis points to 4.5%, marking its third cut in the current policy cycle. With inflation slowing and retail sales data showing signs of weakness, traders now anticipate further easing beyond this week's decision.
The BoE’s Monetary Policy Committee (MPC) is expected to vote 8-1 in favor of a rate cut, with Catherine Mann likely the only member pushing to keep rates at 4.75%. Inflation in the UK services sector, a key metric for the central bank, slowed to 4.4% in December from 5% in November, reinforcing expectations for continued monetary easing.
GBP/USD price movement (Dec 2024 - Feb 2025) Source: TradingView.
Market sentiment cautious as US-China trade tensions escalate
The global risk-off sentiment deepened after China retaliated against U.S. tariffs by imposing duties on American imports and launching an antitrust investigation into Google. These developments have renewed fears of a prolonged U.S.-China trade war, pushing investors toward safer assets and pressuring risk-sensitive currencies like the British pound.
Meanwhile, U.S. President Donald Trump delayed the implementation of tariffs on Mexico and Canada, providing temporary relief for markets. However, concerns over China’s response to Trump’s 10% tariff on its exports have kept volatility elevated.
GBP/USD technical outlook and key levels
GBP/USD has failed to sustain a breakout above 1.2530, as overbought conditions limit upside potential. Analysts at UOB Group expect the pair to remain in a 1.2245 – 1.2530 trading range, with strong resistance at 1.2530 capping any bullish momentum.
While short-term upside is possible, a sustained rally appears unlikely amid looming BoE rate cuts and U.S.-China trade uncertainty. On the downside, a break below 1.24 could push the pound toward 1.2245, a critical support level.
As previously discussed the pound has been on a downward trajectory, with BoE dovish bets and global trade concerns weighing on sentiment. Traders now await the central bank’s policy statement for further clues on the rate path.
