Pound Sterling remains stable as Bailey from the Bank of England confirms a slow approach to reducing interest rates.

• Pound Sterling has reached around 1.3550 against the US dollar, as weaker US economic data in May affects the Greenback.
• The situation with tariffs is weighing heavily on the US dollar, especially after President Trump increased steel and aluminum tariffs to 50% on Wednesday.
• Boe’s Bailey reiterated a cautious and gradual approach towards financial expansion.

Pound Sterling (GBP) appears robust against its major rivals this week. Most UK economic indicators seem stable, aside from those from the antipodean currencies. The main influences for the UK currency this week are expectations regarding the Bank of England’s (BOE) monetary policy and ongoing trade discussions between the US and China.

This month, the BOE is not expected to lower interest rates again, mainly due to inflation concerns and a steady labor market. Meanwhile, Governor Andrew Bailey continues to emphasize a “gradual and prudent” stance in light of global economic uncertainties.

“I think we will remain on a downward path, but the speed is what we’re unsure about,” Bailey mentioned to Congress’s finance committee this past Tuesday.

Additionally, ongoing trade talks between Washington and Beijing are likely to keep pressure on the UK economy. With China’s competitive pricing on the global stage, UK businesses may face tough competition if these two economic powers fail to reach agreements.

On Wednesday, Trump hinted in a post about dealing with Chinese leader Xi Jinping—saying, “I like President XI, but he’s quite challenging when it comes to making a deal!” Despite that, market analysts are cautiously optimistic about a potential trade resolution, as Trump’s comments indicate he’s engaging directly with Xi.

During European trading hours, China’s commerce department called on the US to resolve their trade disputes through negotiation.

Daily Digest Market Mover: Pound Sterling’s Gains Amid US Dollar Weakness

• Pound Sterling showed resilience, trading above 1.3550 against the USD during Thursday’s European sessions. The GBP/USD pairing remains solid, though the US dollar struggles for footing following a sharp drop on Wednesday due to disappointing economic data from May linked to Trump’s tariff measures.
• The US Dollar Index (DXY), which measures the dollar against six major currencies, hovers near a six-week low of 98.60 as recorded on Tuesday.
• On Wednesday, the ADP Employment Change Report indicated that the private sector added only 37,000 jobs in April, falling far short of the expected 115,000—marking the lowest reading since January 2021 and raising concerns regarding labor market stability.
• Furthermore, with the services sector making up two-thirds of the US economy, an unexpected downturn in services activity raises fears of a potential contraction. The ISM Manufacturing PMI Report for May also confirmed a quicker decline in factory sector activity.
• The general downturn in business activity underscores the repercussions of presidents’ conflicting tariff messages, which have led to uncertainty for US manufacturers contemplating expansion.
• This week, Trump announced a doubling of import duties on steel and aluminum to 50%, intending to bolster domestic steel production. However, experts warn this could spur inflation, complicating the Federal Reserve’s decisions regarding interest rates.
• After the ADP report, Trump criticized the Fed on social media, suggesting that “ADP number out!!! Too late—Powell must lower rates.” He emphasized that Europe has already implemented multiple reductions.
• Friday’s upcoming NFP data will be a key indicator for the GBP/USD pair.

Technical Analysis: Pound Sterling Holds Around 1.3550

Pound Sterling is expected to remain around 1.3550 against the US dollar on Thursday following a rise the previous day. The GBP/USD pair shows significant horizontal support from a high of 1.3434 recorded on September 26. Outlook suggests the pair remains strong, supported by the 20-day exponential moving average (EMA) around 1.3443.

The 14-day relative strength index (RSI) is above 60, indicating sustained bullish momentum.

A potential challenge exists at the 1.3750 mark reached on January 13, 2022. Meanwhile, the 20-day EMA could act as a crucial support level.