The British Pound (GBP) trades in a tight range against the US Dollar (USD) on Tuesday, with GBP/USD struggling to find direction as a thin economic calendar in both the United States (US) and the United Kingdom (UK) keeps price action subdued. At the time of writing, the pair is consolidating near 1.3690, pausing a two-day losing streak.
A steady US Dollar is capping upside attempts in GBP/USD. The Greenback staged a sharp rebound from four-year lows after markets welcomed US President Donald Trump’s nomination of former Federal Reserve (Fed) Governor Kevin Warsh as the next Fed Chair.
Warsh’s nomination has eased fears of aggressive rate cuts under political pressure, given his broadly hawkish policy stance.
The US Dollar Index (DXY), which tracks the Greenback’s value against a basket of six major currencies, is trading near one-week highs around 97.58.
However, structural headwinds for the US Dollar, including uncertainty surrounding US President Trump’s disruptive trade agenda, repeated tariff threats and rising government debt, continue to weigh on the longer-term outlook, keeping GBP/USD tilted to the upside.
On the monetary policy front, recent US data has strengthened the view that the Fed can keep interest rates on hold for longer, even as markets still look for roughly two rate cuts later this year.
Speaking on Tuesday, Stephen Miran repeated his call for lower interest rates, saying the central bank needs to cut rates by about one percentage point this year.
Separately, Richmond Fed President Thomas Barkin said the US economy remains “remarkably resilient” and noted that the rate cuts delivered so far have helped support the labour market, while policymakers continue to work through the “last mile” of returning inflation to target.
Meanwhile, the Bureau of Labor Statistics (BLS) said on Monday that the January US jobs report, due on Friday, will be delayed because of the ongoing partial US government shutdown, leaving investors to rely on private-sector indicators, with the ADP Employment Change report scheduled for Wednesday.
In the United Kingdom, attention is firmly on the Bank of England (BoE) interest rate decision on Thursday. Markets widely expect the BoE to leave its policy rate unchanged at 3.75%, as underlying inflation pressure remains elevated.
That said, investors still see scope for rate cuts later this year, after policymakers signalled at their previous meeting that the scale and timing of further easing would depend on how the inflation outlook evolves, while stressing that any policy adjustment is likely to follow a gradual downward path.