- GBP/USD struggles as the US dollar remains steady amid heightened risk aversion.
- The U.S. Secretary of Commerce, Lutnick, has stated that August 1 is a firm deadline, though discussions will progress beyond that date.
- The Bank of England may cut or temporarily halt long-term bond sales due to diminished demand from usual buyers.
After gaining over 0.5% the previous session, GBP/USD slipped to around 1.3480 during Asian trading on Tuesday. The currency pair has weakened because the US dollar is holding firm, likely in response to rising uncertainties ahead of the August 1 tariff deadline set by President Trump.
U.S. Secretary of Commerce Howard Lutnick clarified in a recent interview that while the August 1 timeline is tight and a new tariff will be enacted, trade discussions will not stop afterward; tariff payments will simply begin on that day.
Concerns regarding the independence of the Federal Reserve are growing, influencing market sentiment. Treasury Secretary Scott Bescent indicated that the Fed’s autonomy in monetary matters could be jeopardized by influences extending into non-political areas. He urged for a thorough reevaluation of these issues.
Bescent also suggested reconsidering the Fed’s role as an institution. Criticism towards Fed Chairman Jerome Powell has intensified, particularly concerning President Trump’s dissatisfaction over the Fed’s reluctance to cut interest rates, fueling speculation about potential changes.
Looking at the UK, this Thursday’s S&P Purchasing Managers’ Index (PMI) is anticipated to show the sharpest decline in manufacturing activity in six months, alongside the strongest service sector growth in the same period.
The Bank of England might slow down or pause its long-term bond sales in light of weak demand from traditional investors like pension funds. Traders have slightly adjusted their predictions regarding easing of BOE policy, yet they still foresee two interest rate cuts by 2025.
