Sterling In Focus As BoE Decision And US-UK Trade Deal Speculation Loom

Trading in the forex markets remains subdued. Fed’s policy announcement overnight triggered minimal market reaction, as it delivered a widely expected hold at 4.25–4.50%. While Fed acknowledged that risks of both higher unemployment and higher inflation have increased, Chair Jerome Powell made it clear that rate cuts are not imminent.

“It’s not a situation where we can be preemptive,” Powell emphasized, reinforcing Fed’s data-dependent stance amid ongoing uncertainty from US tariff policies and their impacts.

As attention shifts away from Fed, focus turns squarely to the UK, where the BoE is expected to cut rates by 25 bps. Beyond the cut itself, traders will be parsing the vote split and updated economic projections for signals on the pace of future easing.

Adding a geopolitical dimension to the day’s event risk, there are growing market whispers that a US-UK trade deal will be announced. US President Donald Trump hinted in social media at a “MAJOR TRADE DEAL” to be announced today. While no country was named, sources cited by The Guardian said the deal involves the UK.

If formalized, it would be the first bilateral agreement by the current US administration since its sweeping tariff actions last month. A deal with Britain is seen as relatively straightforward, especially compared to more contentious and prolonged negotiations expected with the EU and China. For markets, such a development could inject fresh direction into an otherwise stagnant environment.

In terms of weekly performance, Yen continues to lead, followed by the Pound and Swiss Franc. On the other end, the Loonie is the weakest, followed by Aussie and Dollar. Euro and Kiwi sit in the middle. However, it should be emphasized that the overall mood remains indecisive, with major pairs and crosses largely trapped within last week’s ranges.

In Asia, at the time of writing, Nikkei is up 0.53%. Hong Kong HSI is up 0.62%. China Shanghai SSE is up 0.21%. Singapore Strait Times is down -0.26%. Japan 10-year JGB yield is up 0.023 at 1.324. Overnight, DOW rose 0.70%. S&P 500 rose 0.43%. NASDAQ rose 0.27%. 10-year yield fell -0.033 to 4.275.

Looking ahead, BoE rate decision is the main focus in European session. Later in the day, US will release jobless claims and non-farm productivity.

BoE to cut, watch vote split and forecasts for dovish signals

BoE is widely expected to deliver a 25 bps rate cut today, bringing the Bank Rate down to 4.25%. Governor Andrew Bailey and fellow policymakers have consistently emphasized a cautious approach to cutting rates, and that tone is expected to persist amid lingering uncertainties.

Most economists surveyed by Reuters anticipated BoE will stick to a quarterly pace of easing, suggesting Bank Rate ends the year at 3.75%. However, market participants are slightly more dovish. Traders are now fully pricing in three more cuts by the end of 2025, projecting a rate of 3.50% at year-end.

There might be some hints on how dovish BoE is leaning to, from today’s vote split and updated economic projections. In particular, focus will fall on whether known dove Swati Dhingra would push for a larger 50bps reduction, and whether there are material downgrades to both growth and inflation forecasts.

From a market perspective, EUR/GBP will be closely watched for signals on investor sentiment following the decision.

EUR/GBP is currently testing support at 55 D EMA (now at 0.8460). Strong rebound from current level would keep rally from 0.8239 alive. A break above 0.8539 resistance should confirm that fall from 0.8737, while deep, has completed as a correction. Retest of 0.8737 should be seen next.

On the flip side, sustained break below the 55 D EMA would raise the risk of near-term bearish reversal, and open the path back toward the 0.8221/0.8239 support zone.

RBNZ flags global growth risks as tariffs echo COVID-era disruptions

RBNZ Governor Christian Hawkesby warned today that rising global tariffs are having a clear and negative impact on global economic activity, prompting the central bank to revise down its projections for global growth.

Speaking to a parliamentary committee, Hawkesby called the effects of the tariff wave “unambiguously” harmful. He added that while New Zealand’s exposure to a 10% US tariff on exports poses challenges, the softer New Zealand Dollar may help cushion some of the blow. Nonetheless, weaker demand from key trading partners is now a growing concern for the country’s outlook.

Hawkesby drew a stark comparison between the supply-side disruptions caused by current tariffs and those seen during the COVID-19 pandemic, stressing that both are capable of delivering long-lasting economic distortions.

“We know from our experience, from the COVID experience, that supply side impacts are significant, and that are long-lasting and can create real challenges,” he said.

He added that the situation remains fluid, with considerable uncertainty about how the structural dynamics of the global economy will adjust to this new trade regime.

BoJ minutes: Caught between global uncertainty and domestic price pressures

Minutes from BoJ’s March meeting revealed growing concern among policymakers over the external risks posed by US tariff policies.

One member warned that downside risks from these policies had “rapidly heightened” and could significantly harm Japan’s real economy, suggesting BoJ should “be particularly cautious when considering the timing for the next rate hike.”

However, not all board members advocated for a cautious stance. Another member stressed that even amid heightened uncertainty, BoJ should not automatically default to a cautious stance, stating that BOJ “might face a situation where it should act decisively”.

A third voice on the board emphasized the importance of incorporating inflation expectations, upside risks to prices, and progress in wage growth into BoJ’s policy deliberations. Domestic developments could still justify tightening if conditions shift meaningfully.

Separately, BoJ Governor Kazuo Ueda reinforced this message in his remarks to parliament today, acknowledging that while food price volatility, particularly for rice, remains elevated, these pressures would ease over time.

Nonetheless, Ueda emphasized the importance of monitoring price developments closely, given the elevated uncertainty in the global economic environment.

GBP/USD Daily Outlook

Daily Pivots: (S1) 1.3254; (P) 1.3318; (R1) 1.3357; More…

Range trading continues in GBP/USD and intraday bias remains neutral at this point. On the downside, firm break of 1.3232 support will indicate short term topping and rejection by 1.3433 key resistance. Intraday bias will be back on the downside for deeper pullback to 55 D EMA (now at 1.3051) and possibly below. On the upside, decisive break of 1.3433 key resistance will confirm larger up trend resumption.

In the bigger picture, price actions from 1.3433 are seen as a corrective pattern to the up trend from 1.3051 (2022 low). Rise from 1.2099 could either be resuming the up trend, or the second leg of a consolidation pattern. Overall, GBP/USD should target 1.4248 key resistance (2021 high) on decisive break of 1.3433 at a later stage.