Pound Sterling (GBP) has seen a decline of 0.2% against the USD, performing modestly among the G10 currencies. UK PM Starmer is focusing on domestic regulation reforms and tax incentives in response to trade tensions stemming from US tariffs.
Market expectations for the Bank of England (BoE) have changed, with a full 25 basis points priced for the May 8 meeting, which adds about 5 basis points from the previous week. The lack of rate support increases the short-term downside risk for GBP.
Gbp Usd Reversal
GBP/USD has experienced a notable reversal, breaking its one-month range and reaching new local lows in the mid/lower-1.28s. The Relative Strength Index (RSI) is now below 50, indicating bearish momentum, with no clear support in sight before the lower 1.27s.
This movement in the Pound has been shaped by several overlapping forces. On the political front, Starmer’s approach—centred squarely on reforming regulation and tinkering with tax incentives—is a reaction to renewed tensions spurred by US tariffs. While his focus appears to be internal, the external pressures from cross-border trade dynamics are making themselves felt more keenly through the currency’s performance. These targeted policy shifts may support investors’ confidence over time, but in the near term they’re not tipping the balance in Sterling’s favour.
At the same time, pricing in money markets reflects a shift in how traders are adjusting their views on future Bank of England moves. There’s now a complete quarter-point rate cut priced in for the 8 May meeting. That’s up from just 20 basis points last week. The front-loading of those expectations implies a greater degree of certainty, or at the very least, increased conviction around a May cut. This, in turn, is pulling short-term interest rate differentials away from Sterling’s favour.
As we’ve seen, the GBP/USD pair broke out decisively from its recent consolidation. It wasn’t a subtle move. By dipping lower through the 1.28s, the pair snapped technical support that had held for several weeks. The downside extension aligns with an RSI that is now firmly below the midline. That kind of reading doesn’t suggest oversold conditions just yet—more accurately, it signals that selling pressure is intact with room to go. The absence of prominent technical support before the lower 1.27 area means there’s not much underneath to halt any continued retreat in price, at least not until further momentum signals develop.
Tactical Stance And Market Dynamics
From our perspective, this shifts the tactical stance—for now—towards a more defensive posture. Rate hike expectations are cooling. If this broad repricing continues, the Pound could remain under pressure, especially as macroeconomic divergence with the Federal Reserve becomes more apparent. Watching forward guidance and wage growth data will be essential, but for now, the momentum path has tilted lower.
As we assess positioning, keeping a closer eye on intraday levels is key. Given that spot broke through its one-month range, traders will need to reassess not just absolute levels but also the velocity and volume behind each move. Thin liquidity pockets below recent lows may accelerate any move into the 1.27s if no opposing flows step in. Under these conditions, overly tight stops might get clipped quickly, and wider risk parameters may prove more functional.
Looking ahead, we’re also monitoring how rate differentials and sovereign spreads behave across G10 currencies. These mechanics are increasingly shaping price movement far more than individual headlines or isolated data points. So if US yields continue to hold firm, and if BoE easing expectations remain in place or build further, GBP/USD will remain prone to weakness. We’re taking this opportunity to refocus attention on cross comparisons with EUR and AUD too, to balance exposure in any further downside scenario.
