GBP/USD rebounds after touching a one-month low during the Asians session on Monday.
The divergent Fed-BoE policy expectations support the pair amid a weaker USD.
The global carnage offers some support to the safe-haven buck and might cap the major.
The GBP/USD pair attracts some dip-buyers near the 1.2830 region, or over a one-month low touched during the Asian session on Monday and for now, seems to have stalled its retracement slide from a six-month peak touched last week. Spot prices currently trade around the 1.2900 round figure, though the uptick lacks bullish conviction amid the gloomier global economic outlook.
US President Donald Trump's sweeping reciprocal tariffs announced last Wednesday fueled worries about the widening trade war, which, in turn, could dent the global. This continues to weigh heavily on investors' sentiment and is evident from a sea of red across the global equity markets. This is seen benefiting the US Dollar's (USD) relative safe-haven status against its British counterpart and acting as a headwind for the GBP/USD pair.
The USD bulls, however, seem reluctant to place aggressive bets amid the rising bets that a tariff-driven slowdown in the US business activity might force the Federal Reserve (Fed) to resume its rate-cutting cycle soon. In fact, the markets are now pricing in the possibility that the Fed will deliver four quarter-basis-points rate cuts in 2025. This, along with the anti-risk flow, leads to a steep decline in the US Treasury bond yields and undermines the USD.
The British Pound (GBP), on the other hand, seems to draw support from expectations that the Bank of England (BoE) will lower borrowing costs more slowly than other central banks, including the Fed. This, in turn, suggests that the path of least resistance for the GBP/USD pair is to the upside. Even from a technical perspective, a bounce from the 200-day Simple Moving Average (SMA) support favors the GBP bulls and validates the positive outlook.
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