GBP/USD Falls Below 1.3500 on Tariff Tensions and Fed Uncertainty

GBP/USD Slips Below 1.3500 on Tariff Deadline Tensions and Fed Uncertainty

The GBP/USD pair retreated to around 1.3480 during Tuesday’s Asian session, following a strong prior-day rally. This decline comes as investor caution intensifies ahead of the August 1 tariff deadline, while sentiment is further pressured by US Federal Reserve policy concerns and evolving Bank of England (BoE) strategies.

Tariff Fears Boost US Dollar

US Commerce Secretary Howard Lutnick reaffirmed that August 1 is a hard and fast deadline for the implementation of new tariffs, although trade negotiations with the UK and EU will continue beyond that date. This hawkish stance has fueled a risk-off mood, leading investors to seek the safety of the US Dollar, and thus weighing on the British Pound.

Fed Under Political Pressure

US Treasury Secretary Scott Bessent raised alarms over the Federal Reserve’s independence, warning about the institution's "mandate creep." He also suggested a structural review of the Fed, echoing President Trump’s criticism of Fed Chair Jerome Powell for resisting further rate cuts — reigniting speculation about a potential leadership shake-up at the central bank.

🇬🇧 BoE Bond Sales Under Review, UK PMI in Focus

In the UK, the Bank of England may scale back or pause its sale of long-dated government bonds amid declining interest from traditional buyers such as pension funds. This comes as traders continue to price in two BoE rate cuts in 2025, although expectations for immediate action have softened.

On the data front, Thursday’s S&P Global PMI release is expected to show the smallest contraction in UK manufacturing in six months and the strongest services sector expansion in nearly a year — a possible stabilizing factor for the Pound.