The British Pound (GBP) is trading in a tight range against the US Dollar (USD) on Tuesday, with GBP/USD struggling to find direction as a thin economic calendar in both the United States (US) and the United Kingdom (UK) continues to slow price action. At the time of writing, the pair is consolidating near 1.3690, stopping a two-day losing streak.
A stable US dollar is limiting upside efforts for GBP/USD. The greenback made a sharp comeback from four-year lows after markets welcomed US President Donald Trump’s nomination of former Federal Reserve (Fed) Governor Kevin Worsh as the next Fed chair.
Warsh’s nomination has eased fears of aggressive rate cuts under political pressure, given his broadly hawkish policy stance.
The US dollar index (DXY), which tracks the value of the greenback against a basket of six major currencies, is trading near a one-week high of 97.58.
However, structural headwinds for the US dollar, including uncertainty regarding US President Trump’s disruptive trade agenda, repeated tariff threats and rising government debt, are weighing on the long-term outlook, keeping GBP/USD tilted to the upside.
On the monetary policy front, recent US data reinforced the view that the Fed could keep interest rates on hold for longer, although markets are still expecting about two rate cuts later this year.
Speaking on Tuesday, Stephen Mirran reiterated his call for lower interest rates and said the central bank needs to cut rates by about one percentage point this year.
Separately, Richmond Fed President Thomas Barkin said the U.S. economy remains “remarkably resilient” and noted that rate cuts so far have helped support the labor market while policymakers continue to work through the “last mile” of getting inflation back on target.
Meanwhile, the Bureau of Labor Statistics (BLS) said on Monday that the January US jobs report, due on Friday, will be delayed due to the partial US government shutdown, forcing investors to rely on private sector indicators, with the ADP employment change report scheduled for Wednesday.
In the United Kingdom, the focus is on the Bank of England (BoE) interest rate decision on Thursday. Markets widely expect the BoE to leave its policy rate unchanged at 3.75%, as underlying inflation pressures remain elevated.
That said, investors still see room for a rate cut later this year, as policymakers indicated at their last meeting that the scale and timing of further relief would depend on how the inflation outlook evolves, while stressing that any policy adjustment would likely be gradual to the downside.
