BUZZ-COMMENT-Tariff risks, expected BoE rate cut keep sterling under pressure

Sterling is likely to remain under pressure ahead of Thursday's widely expected BoE rate cut even after trimming losses on Monday caused by market reaction to U.S. tariffs.

Though the tariffs announced by U.S. President Donald Trump were aimed at Canada, Mexico and China, the prospect of a hit to global trade could spill over into the already struggling UK economy, leaving sterling vulnerable.

The BoE’s rate decision and subsequent commentary will be crucial. Before the tariff news, sterling traders anticipated a more dovish lean by policy makers as the BoE sought to reduce rate-related headwinds on the economy.

Cable reversed early weakness and put in a slight 0.14% gain to 1.2410, and the potential downstream effects on growth and income from the trade issue mean the falling 55-DMA at 1.2514 and Jan. 27 high at 1.2523 could cap it for now.

With further tariff news difficult to predict, any escalation of the issue or moves by the BoE to jumpstart the UK economy by cutting rates in the current above-target inflation environment could put Monday's flash low at 1.2249 back on trader's radar, which might expose the Jan. 13 2025 low at 1.21.

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