GBP/USD holds steady above 1.2900 due to a technical pullback in US Dollar

GBP/USD remains steady as the US Dollar undergoes a slight correction.
Fed’s Bostic cautioned about ongoing economic uncertainty, indicating that inflation progress could be slower than expected.
The Pound Sterling found support from strong UK PMI data, highlighting signs of economic recovery.

Akhtar Faruqui FXStreet

GBP/USD remains stable around 1.2920 during Tuesday’s Asian session after gains in the previous session. However, the pair holds ground amid a downward correction in the US Dollar (USD). The Greenback strengthened, supported by robust S&P Services PMI data and cautious remarks from Federal Reserve officials.

The S&P Global Services PMI surged to 54.3 in March, a three-month high, up from 51.0 in February and exceeding market expectations of 50.8. The service sector rebounded sharply from its 15-month low, while the Composite PMI rose to 53.5, marking its strongest expansion since December 2024.

Atlanta Fed President Raphael Bostic warned of persistent economic uncertainty, suggesting inflation progress may be slower than anticipated. He revised his 2025 rate cut expectations downward, citing ongoing price pressures and trade-related risks.

The risk-sensitive GBP/USD pair could encounter headwinds as traders remain cautious ahead of US President Donald Trump’s scheduled tariff announcement on April 2. While Trump hinted that "a lot" of countries could receive exemptions, details of the tariff plans remain uncertain.

Meanwhile, the Pound Sterling (GBP) gained support from strong UK PMI data, signaling an economic recovery. The latest figures showed significant growth in the services sector, driven by demand in financial and consumer services. As a result, traders now see a 60% chance of a quarter-point interest rate cut by the Bank of England (BoE) in May, down from earlier expectations of a more aggressive easing path.

Pound Sterling FAQs

What is the Pound Sterling?

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).

How do the decisions of the Bank of England impact on the Pound Sterling?

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.

How does economic data influence the value of the Pound?

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.

How does the Trade Balance impact the Pound?

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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Author

Akhtar Faruqui

FXStreet

Akhtar Faruqui is a Forex Analyst based in New Delhi, India. With a keen eye for market trends and a passion for dissecting complex financial dynamics, he is dedicated to delivering accurate and insightful Forex news and analysis.

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