The British Pound (GBP) remains on the defensive against the US Dollar (USD), with the GBP/USD pair trading narrowly around the mid-1.3500s during Monday’s Asian session. The pair has retreated from Friday’s three-year high but lacks clear bearish momentum, as investors adopt a cautious stance ahead of critical economic data and central bank announcements later this week.
Market participants are closely watching Wednesday’s release of UK consumer inflation figures, followed by the Bank of England’s (BoE) monetary policy decision on Thursday. Both events are expected to play a pivotal role in shaping the Pound’s short-term trajectory. Simultaneously, the US Federal Reserve is set to announce its policy decision on Wednesday, which could significantly impact the USD side of the pair.
Adding to the uncertainty, the UK’s April GDP report released Friday revealed a larger-than-expected economic contraction of 0.3%. The disappointing data has heightened expectations that the BoE may pursue a more aggressive rate-cutting strategy, exerting downward pressure on the Pound.
Meanwhile, the US Dollar is drawing modest support from safe-haven demand amid rising geopolitical tensions in the Middle East. Ongoing hostilities between Israel and Iran have intensified market jitters, lending a slight bid to the greenback. However, broader USD gains are tempered by market consensus that the Federal Reserve could begin easing policy by September, as recent inflation data continues to show signs of cooling.
In addition, a broadly positive risk sentiment in global markets is curbing demand for the safe-haven USD, offering some support to GBP/USD. This combination of mixed drivers suggests that traders are hesitant to place directional bets until greater clarity emerges from this week’s high-impact central bank events.
As the pair hovers below key resistance, investors are advised to tread carefully, as a confirmed top in spot prices has yet to materialize. The next decisive move will likely hinge on the outcomes of this week’s economic releases and policy decisions from both sides of the Atlantic.
