BUZZ-COMMENT-BoE next for sterling after weathering tariff storm
GBP/USD has navigated U.S. tariff uncertainty well, quickly recovering from Monday's flash low at 1.2249, though it is likely to remain rangebound as traders await guidance from the BoE on Thursday about how much further UK rates may slide as the Fed remains steady.
Futures markets project the UK bank rate ending 2025 at 3.89%, as per LSEG's IRPR, down from 4.15% in late January.
A softer BoE rate outlook combined with a Fed on hold could widen U.S.-UK rate differentials, weighing on GBP/USD.
IMM spec positioning indicates the recently established sterling net short grew in the latest reporting week, powered by both a reduction in longs and rise in shorts -- a fundamentally weak signal.
Though U.S. President Donald Trump has said that trade with Britain was "out of line" he has indicated that the issues can be worked out.
Given current conditions, GBP/USD is unlikely to surpass its recent trend high at 1.2523 as UK rate and global trade concerns persist. And should U.S. yields continue higher, pulling gilts up with them, UK fiscal concern may also rise, putting the 2025 low at 1.21 back in focus.
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