Photo by Colin Watts on Unsplash

• GBP/USD rallied on Tuesday, bolstered by headlines of an incoming US-UK trade agreement.
• Specific details remain limited, but GBP markets were buoyed by hopes to avert US tariffs.
• The Pound Sterling settled 0.4% higher against the Greenback after testing 1.3400.

GBP/USD rose on Tuesday, climbing four-tenths of one percent on the day and testing the 1.3400 handle on headlines of a possible US-UK trade deal that would see the UK avoid the brunt of trade tariffs being actively pursued by the Trump administration.

The Federal Reserve’s (Fed) upcoming rate call due on Wednesday still hangs over markets as the key market event of the week. Despite markets broadly anticipating another hold on Fed rates, investors will be taking a close look at policymaker comments, specifically Fed Chair Jerome Powell’s statement, for any signs that the Fed might be pivoting toward a rate-cutting cycle sooner rather than later.

Fed, Boe double header due this week
 

The Fed has come under pressure on multiple fronts to drop interest rates recently: market participants are always on the hunt for cheaper financing options, and the Trump administration has been incredibly vocal and adamant that the Fed’s job should be to lower interest rates in order to make US debt servicing cheaper. This runs largely opposite the Fed’s dual mandates of supporting full employment and keeping price volatility in check, however these key aspects of the Fed’s mandate are largely lost on US President Donald Trump.

The Bank of England (BoE) will be following up Wednesday’s Fed action with its own rate call on Thursday. Unlike the Fed, the BoE is broadly expected to deliver another quarter-point rate trim, with the BoE’s Monetary Policy Committee (MPC) expected to vote nine-to-one in favor of delivering its fourth rate cut since August of last year.

GBP/USD price forecast
 

Despite a firm bullish performance on Tuesday, GBP/USD remains embroiled in a near-term consolidation range baked in between 1.3450 and 1.3250. Price action is leaning into the midrange, with technical oscillators showing momentum has largely drained out of Cable markets.

GBP/USD is still well supported far above the 200-day Exponential Moving Average (EMA) near 1.2830, however, further topside momentum will take a strong showing from bidders that have remained trapped below the 1.3400 handle for the time being.

GBP/USD daily chart
 

More By This Author: