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Pound Sterling Slips from Three-Year High as Fed, Tariffs, and Growth Jitters Set the Stage for Volatility
Economic
Summary:
The British Pound retreats from its three-year peak against the US Dollar as investors turn cautious ahead of key US economic releases, including Q1 GDP.
Sell
PENDINGGBPUSD
EXP
1.33700
Entry Price
1.33200
TP
1.34150
SL
1.33235 -0.00817 -0.61%
--
Point
PENDING
1.33200
TP
CLOSING
1.33700
Entry Price
1.34150
SL
The British Pound lost momentum against the US Dollar on Wednesday, edging back to 1.3355 during the European trading session after notching a fresh three-year high at 1.3445 just a day earlier. The GBP/USD pair, once fueled by robust UK rate expectations and a softening US macro narrative, now finds itself in the throes of market repositioning, as traders weigh both geopolitical headwinds and monetary policy uncertainty on both sides of the Atlantic.
Much of the intraday pullback is driven by a modest recovery in the US Dollar ahead of a packed North American data calendar, headlined by the preliminary reading of first-quarter Gross Domestic Product. According to the US Bureau of Economic Analysis (BEA), growth is projected to have sharply decelerated to an annualized pace of 0.4%, well below the previous 2.4% print and reflective of early-stage economic softness attributed to trade disruptions and policy volatility out of Washington.
The marked slowdown is not a complete surprise. Earlier this month, President Donald Trump stunned markets with another round of sweeping tariffs targeting major trade partners. The rationale was clear: protect American industry, curb deficits, and leverage negotiation power. However, the broader implications are proving more destabilizing than stimulatory. Businesses have been reluctant to expand capacity or investment amid an atmosphere of “tweet-driven” policy unpredictability, stifling any potential for near-term economic momentum.
At the same time, a string of complementary US data releases including the Q1 Employment Cost Index, ADP employment figures for April, and the Fed’s preferred inflation gauge, the Core PCE Price Index will provide further clarity on the health of the labor market and inflationary dynamics. Expectations point to steady wage growth at 0.9% in Q1, while private-sector job creation is seen dropping to 108,000 in April, down from 155,000 in March. Perhaps most critical is the core PCE figure, which is projected to rise just 2.6% in March, a slowdown from the 2.8% prior reading.
Such data could tip the scales toward a more accommodative Federal Reserve. While markets are near-unanimous in pricing no change for the Fed’s May meeting keeping the target range at 4.25%-4.50% futures now reflect a growing 65% probability of a rate cut in June, according to CME’s FedWatch Tool. That shift reflects a broader reassessment of the Fed’s inflation target trajectory and the economic drag induced by fiscal and trade policy clashes.
Despite this dovish tilt, Fed Chair Jerome Powell remains under persistent political pressure. During an event marking his 100th day in office, President Trump offered yet another thinly veiled critique of the Fed’s rate policy. While avoiding naming Powell directly, Trump’s remarks were unmistakable: “You’re not supposed to criticize the Fed... but I know much more than he does about interest rates, believe me.” Such statements underscore the ongoing tension between White House objectives and the Fed’s independent mandate, a friction that adds to the general climate of uncertainty.
In the UK, the Bank of England faces its own credibility test. The British Pound, though still elevated by recent standards, has come under pressure as traders increasingly price in a potential rate cut by the BoE in its May 8 policy meeting. Market sentiment shifted notably after BoE policymaker Megan Greene warned that the US-led trade war could have net disinflationary effects on the UK economy. Speaking at the Atlantic Council, Greene raised alarms about looming job market stress, exacerbated by an increase in employer contributions to national insurance up to 15% from 13.8% as of this month.
Her comments echoed concerns expressed by BoE Governor Andrew Bailey last week at the International Monetary Fund’s Spring Meetings. Bailey emphasized the risks posed by external trade shocks and signaled a need for policy flexibility, telling reporters, “We do have to take very seriously the risk to growth.” That sentiment has further emboldened market bets on a 25-basis-point BoE rate cut, especially in the absence of meaningful UK economic data this week.
Indeed, with the UK calendar offering little in terms of fundamental support, Sterling is largely at the mercy of external forces. Chief among them is the ongoing US-China trade confrontation. The Trump administration has challenged Beijing to return to the negotiating table, citing China’s disproportionate trade surplus. “I believe that it’s up to China to de-escalate, because they sell five times more to us than we sell to them,” said top White House advisor Bessent in an interview with CNBC. Beijing, however, remains defiant, vowing to defend its “interests and dignity.”
Technical Analysis
From a structural perspective, GBP/USD has broken decisively below the prior range support near 1.3380, marking a potential bearish shift. The pair had repeatedly failed to sustain above the Point of Control (POC) at 1.3415, a zone of high-volume resistance now acting as a technical ceiling. With price now descending into a low-volume node, momentum could accelerate toward the next key support area at 1.3319.
This setup suggests the market is rejecting the higher value area, breaking into thinner liquidity, and potentially establishing a new bearish leg. A close below 1.3380 acts as confirmation for further downside, with stops ideally positioned above 1.3415 to manage risk. As always, volume and price behavior near the 1.3320 level will offer clues on whether bears can maintain control or if the market will find reason to reverse.
TRADE RECOMMENDATION
SELL GBPUSD
ENTRY PRICE: 1.3370
STOP LOSS: 1.3415
TAKE PROFIT: 1.3320
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