For the moment, the relative market stability that has followed the U.S.-China trade truce announced earlier this week favors sterling against the dollar, but only slightly, and that could change as well. Sterling extended its gains early Wednesday, breaking above its 10- and 21-day moving averages, eying a move toward 1.34, helped by modestly softer Treasury yields. GBP/USD now eyes its 2025 high at 1.3445, set on April 28, as traders shrug off a dollar bid earlier in the week that followed the temporary U.S.-China tariff rollback. Those developments had briefly lifted the dollar by softening global recession concerns. But, UK inflation expectations have remained firm — highlighted by BoE’s Huw Pill -- and U.S. data disappointed, widening yield spreads, supporting sterling and pushing GBP/USD toward the top of its 2025 range, defined by support at the 30-DMA near 1.3210 and resistance at the 2025 high of 1.3445. Attention is now on rate fundamentals and both the Fed and BoE are in data-dependent mode.

LSEG’s IRPR priced in up to four Fed cuts as recently as two weeks ago, despite the Fed’s cautious tone on cuts. Those bets have since been scaled back, with markets now expecting the BoE to stay on hold until August and the Fed until September.

Unless data or trade dynamics shift, GBP/USD is likely to remain anchored within the 1.32–1.3450 range.
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(Paul Spirgel is a Reuters market analyst. The views expressed are his own)