GBP volatility hinges on rate cuts and tariffs

GBP volatility hinges on rate cuts and tariffs

The Bank of England is expected to cut interest rates this week, balancing the need to support slowing growth against the risk of renewed inflation.

A 25bp cut is largely priced in, but Goldman Sachs anticipates gradual GBP weakness rather than an immediate sharp decline, though a more dovish stance could pose downside risks.

Additionally, the UK, like other economies, faces potential tariff announcements from the Trump administration.

GBP/USD remains above 1.2385, with the 2-hour RSI above 60, indicating potential selling pressure.

UK Prime Minister Keir Starmer will be seeking to dissuade Trump from imposing tariffs by highlighting US trade data showing a trade surplus with the UK in 2023.