Why Is the Pound Sterling Gaining Strength Despite BoE Rate Cut Expectations? | GBP/USD Analysis

Market Surprise: Sterling Defies Dovish Expectations

The can ethereum reach kBritish currency continues its upward trajectory against most major counterparts this Tuesday, with the notable exception of the Japanese Yen. This strength emerges despite overwhelming market consensus predicting another 25 basis point reduction in the Bank Rate when Threadneedle Street announces its decision on Thursday. Should policymakers follow through, this would mark the fourth consecutive cut since the central bank initiated its easing cycle last August.

Policy Dilemma: Growth Concerns vs. Trade War Risks

Currency traders appear focused on potential revisions to forward guidance rather than the near-certain rate reduction. The Monetary Policy Committee faces mounting pressure to address both slowing economic expansion and escalating global trade tensions. Recent communications suggest officials may abandon their previous "gradual approach" language as external risks multiply.

Financial institutions including Commonwealth Bank of Australia anticipate downward revisions to GDP projections, with analysts noting: "The combination of tariff impacts and supply chain disruptions creates substantial headwinds that could force more aggressive policy responses."

Dollar Weakness Amplifies Sterling Gains

The GBP/USD pair's ascent toward 1.3330 reflects both pound strength and greenback softness ahead of Wednesday's Federal Reserve announcement. Markets price near-certainty that the FOMC will maintain its current target range, marking three consecutive meetings without policy adjustments.

Diverging Central Bank Paths

While both central banks face economic uncertainty, their policy trajectories appear increasingly divergent. The BoE's proactive stance contrasts with the Fed's "wait-and-see" approach, creating favorable yield differential dynamics for sterling bulls. Technical indicators reinforce this outlook, with the currency pair maintaining bullish positioning above all key moving averages.

Technical Perspective: Bullish Momentum Intact

The pound's breach of 1.3300 signals potential for retesting multi-year highs near 1.3445. Momentum indicators suggest consolidation may precede further upside, with the 14-day RSI hovering near equilibrium levels. Key support now resides at April's swing high around 1.3200, while resistance emerges at the psychological 1.3400 handle.

Market participants continue monitoring trade policy developments, particularly regarding potential agreements between Washington and its major trading partners. These geopolitical factors may ultimately determine whether sterling can sustain its current momentum through the week's critical central bank meetings.