- GBP/USD remains steady due to market caution ahead of the US NFP data release on Friday.
- The US Dollar weakens as US Treasury yields fall on rising sentiment of more aggressive Fed rate cuts this year.
- BoE’s Mann reiterated that the larger rate cut was intended to better communicate the policy stance.
GBP/USD holds little gains after registering losses in the previous session, trading around 1.2880 during the Asian hours on Friday. The pair steadies as traders adopt caution ahead of the US Nonfarm Payrolls (NFP) report scheduled to be released later in the North American session.
The US Dollar Index (DXY), which measures the USD against six major currencies, extends its losing streak for the fifth successive day, driven by falling US Treasury yields as markets anticipate more aggressive Fed rate cuts this year amid US growth concerns. The DXY is trading around 104.00 with 2- and 10-year yields on US Treasury bonds standing at 3.94% and 4.24%, respectively, at the time of writing.
According to MUFG Bank analysts, expectations are increasing that the Federal Reserve (Fed) may prioritize addressing slowing economic growth over elevated inflation in response to US tariffs, which could weigh on the US Dollar. A recent decline in consumer confidence indicates growing household concerns over the inflationary impact of tariffs and economic risks stemming from rising policy uncertainty in the United States (US).
Meanwhile, traders remain focused on global trade developments, as Canada postpones its planned second round of retaliatory tariffs on US products until April 2. This decision follows US President Donald Trump’s exemption of Mexican and Canadian goods under the USMCA from his proposed 25% tariffs.
In the United Kingdom (UK), rate markets now project fewer than 50 basis points (bps) in rate cuts from the Bank of England (BoE) in 2025, marking a substantial reduction in expectations as central banks continue to struggle with persistent inflation.
BoE Monetary Policy Committee member Catherine Mann stated on Thursday that gradual interest rate adjustments no longer provide clear signals to volatile financial markets. Mann emphasized that larger moves are now necessary to “cut through” market noise for the benefit of the economy. Citing Bloomberg, she noted that the larger rate cut she supported in the latest meeting aimed to more effectively convey policy stance and influence economic conditions.
