British Pound softens to near 1.3250 as elevated US yields outweigh BoE’s hawkish tone
- GBP/USD weakens to around 1.3250 in Tuesday’s early Asian session.
- Higher US bond yields and robust fundamentals in the US economy support the US Dollar.
- BoE’s Ramsden said there could be a case for increasing Bank Rate if the inflation outlook continues to build.
The GBP/USD pair loses ground to near 1.3250 during the early Asian trading hours on Tuesday. US Treasury yields remain above 5% at multi-decade highs, supporting the US Dollar (USD) against the British Pound (GBP). Traders will keep an eye on the Fedspeak later on Tuesday.
Energy supply risks and robust US economic data have raised inflation concerns and prompted traders to price in further Federal Reserve (Fed) rate hike bets. Additionally, the rise in long-end Treasury yields also underpins the Greenback and creates a headwind for the major pair.
"What's happening is that you've got the US rejecting the Iranian offer and oil prices jumped, pushing upward pressure on US yields, and that is what's lifting the dollar more broadly," said Marc Chandler, chief market strategist at Bannockburn Forex.
On the other hand, hawkish remarks from the Bank of England (BoE) policymakers could lift the Cable in the near term. BoE Deputy Governor Ramsden said on Monday that there could be a case for raising the Bank Rate if upside pressure on the inflation outlook keeps building.
Ramsden was part of the 6-3 majority on the BoE's Monetary Policy Committee who voted to leave interest rates unchanged this month. Unlike the US central bank, the BoE has not raised interest rates since the start of the Iran war, partly because its policy stance was already restrictive.
Pound outlook clouded as UK growth lags and BoE faces tougher policy mix
Analysts at HSBC warn that the Pound is likely to remain under pressure in the near term, highlighting that "weak UK labour demand and sluggish private sector momentum could weigh on the GBP in the near term, particularly as the US economy is looking more resilient." They note that markets are "already pricing around 100bp of tightening from the Bank of England by July 2027," but caution that "higher energy prices create a difficult policy mix: inflation risks are rising even as growth momentum faces a challenging outlook," leaving the BoE navigating a more complex backdrop for GBP/USD.
Ramsden flags upside inflation risks, supports firmer GBP
BoE’s Ramsden scores 8.4/10 on FXS Speechtracker, notably above the historic 7.1/10 baseline, signaling a stronger-than-usual policy impact. The emphasis on external inflation pressures from energy, weather and AI-related supply chains, alongside domestic indirect effects in food prices and potential second-round effects, points to heightened vigilance on persistent price risks.
By stating that risks to the inflation outlook have tilted to the upside and that continued upside pressures could justify increasing Bank Rate, Ramsden delivers a clearly hawkish shift versus the average tone. This combination of elevated score and explicit openness to further tightening is supportive for GBP, especially if incoming data validate the upside inflation narrative.
Technical Analysis: GBP/USD remains capped under the 100-day SMA
In the daily chart, GBP/USD keeps a bearish near-term bias as spot remains capped beneath the Bollinger Bands simple moving average (SMA) and the 100-day SMA. Price trades closer to the lower half of the recent Bollinger envelope, while the Relative Strength Index (RSI) at 30.0 hovers just above oversold territory, hinting that while downside pressure persists, the sell-off is stretched rather than impulsive.
On the topside, initial resistance is located in the 1.3410–1.3415 cluster formed by the Bollinger middle band and the 100-day SMA; a daily close above this area would be needed to ease the current bearish tone and open the door toward the upper Bollinger band near 1.3645. On the downside, the lower Bollinger band at 1.3175 stands as the next support level; a break under this floor would reinforce the prevailing downside bias and expose further weakness toward the mid-1.31s.
(The technical analysis of this story was written with the help of an AI tool. Know more.)
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
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