GBP Volatility Tied to BoE Rate Cuts and US Tariff Risks

The British pound enters a volatile week as the Bank of England is widely expected to deliver a 25-basis-point rate cut, part of its ongoing effort to cushion slowing economic growth while balancing inflation risks.

Focus on Guidance, Not the Cut

While the rate move itself is largely priced in, investors are paying closer attention to the BoE’s tone and updated projections. A dovish shift in forward guidance could amplify downside risks for sterling, especially if policymakers emphasize weaker growth momentum over inflation control.

Market and Analyst Views

Goldman Sachs anticipates a gradual weakening of GBP rather than a sharp selloff. However, traders warn that if the central bank signals deeper or faster easing, markets may react more aggressively. GBP/USD currently trades above 1.2385, though the 2-hour RSI above 60 suggests that near-term selling pressure could emerge.

Trade Tensions Add to Risk

Uncertainty is further heightened by the threat of new U.S. tariffs on UK exports. Prime Minister Keir Starmer is lobbying to avert such measures, citing U.S. trade data showing a surplus with the UK in 2023. A breakdown in talks could weigh further on sterling sentiment, compounding the effect of monetary easing.

Outlook

With both monetary and trade policy risks in play, GBP traders face a week of heightened volatility. The BoE’s forward guidance combined with Washington’s tariff stance may determine whether GBP/USD holds above support or risks slipping into a deeper downtrend.