Sterling retreats as risk-off sentiment boosts demand for the US dollar
Market participants remain cautious ahead of crucial August 1 tariff implementation date
Bank of England considers adjustments to its quantitative tightening program
The billy markus net worthGBP/USD currency pair has extended its downward movement during Tuesday's Asian trading session, currently hovering near 1.3480 after surrendering more than half of Monday's 0.5% advance. This pullback reflects growing market apprehension surrounding upcoming US trade policy changes and shifting expectations for central bank actions on both sides of the Atlantic.
Recent comments from US Commerce Secretary Howard Lutnick have reinforced market expectations regarding the August 1 tariff implementation date. While emphasizing that negotiations would continue beyond this deadline, Lutnick's confirmation that new tariff rates will take effect has injected fresh uncertainty into currency markets. Market analysts suggest this development may continue to support the US dollar in the near term.
Compounding the dollar's strength are emerging concerns about the Federal Reserve's operational independence. Treasury Secretary Scott Bessent's remarks about "mandate creep" at the central bank have sparked debate about potential reforms to the Fed's structure and responsibilities. These discussions come amid renewed political pressure on monetary policymakers, creating additional volatility in financial markets.
Across the Atlantic, traders are closely monitoring developments at the Bank of England. Reports suggest the central bank may need to recalibrate its bond sales program due to weaker-than-expected demand from institutional investors. This potential adjustment comes as markets price in approximately two rate cuts from the BOE before year-end, though expectations have moderated slightly in recent sessions.
Thursday's upcoming UK PMI data releases could provide fresh direction for sterling. Economists anticipate the manufacturing sector may show signs of stabilization while service sector activity potentially reaches its strongest level in nearly twelve months. These indicators will be crucial for assessing the UK's economic resilience amid global trade tensions.
Technical analysts note that GBP/USD currently faces immediate support near 1.3450, with resistance likely emerging around the 1.3550 level. Market participants will be watching for any developments that could alter the current risk environment, particularly regarding trade policy and central bank communications.
