- GBP/USD falls as the US Dollar rebounds after two consecutive sessions of losses.
- The US Dollar weakens as foreign investors avoid US assets amid rising trade uncertainty.
- The Pound Sterling weakens as markets expect the Bank of England to begin rate cuts as early as March.
GBP/USD edges lower after two days of gains, trading around 1.3480 during the Asian hours on Tuesday. The pair declines as the US Dollar (USD) rebounds from losses recorded over the previous two sessions. Traders will focus on the US ADP Employment Change four-week average later in the day, along with speeches from Federal Reserve officials.
However, the GBP/USD pair could recover if the US Dollar faces renewed pressure, as foreign investors shy away from US assets amid escalating trade uncertainty. According to The Wall Street Journal, US President Donald Trump’s administration is considering fresh national security tariffs on multiple industries after a Supreme Court ruling invalidated several of his second-term levies. The proposed measures would be implemented under Section 232 of the Trade Expansion Act of 1962 and remain separate from the 15% global tariff announced on Saturday.
On monetary policy, Christopher Waller said his decision on supporting a rate cut at the March Federal Open Market Committee (FOMC) meeting will depend on February labor market data. Swaps markets currently assign just a 5% probability to a 25-basis-point cut in March, while pricing in around 50 bps of easing in 2026.
Meanwhile, the Pound Sterling (GBP) remains under pressure amid rising expectations that the Bank of England (BoE) could begin cutting rates as early as March, reflecting softer labor market conditions and easing inflation.
Dovish signals were reinforced by BoE Monetary Policy Committee member Alan Taylor, who voiced concerns about the UK’s growth outlook, expressed confidence that inflation will return to the 2% target, and supported further near-term rate cuts.
