GBP/USD catches much-needed bounce from key moving average as tariffs loom

• GBP/USD caught a thin rebound from the 200-day EMA near 1.2700 on Tuesday.
• Markets are coiling ahead of the US's planned tariff implementation.
• Risk appetite is slowly recovering, but overarching fears remain.

GBP/USD snapped a harsh two-day losing streak on Tuesday, finding a technical bounce from the 200-day Exponential Moving Average (EMA) just north of the 1.2700 handle. Price action remains strung out in no man's land ahead of the US's planned tariff implementation, and investors are hunkering down with key US inflation and sentiment figures due later this week.

Forex Today: Markets' attention shifts to the Fed Minutes

It remains a thin week overall on the UK side of the economic data docket, and Tuesday was a welcome reprieve from the usual deluge of geopolitical and trade headlines that have become the norm from the Trump administration in recent weeks. Still, several key policymakers from the Federal Reserve (Fed) took the opportunity to come out of the woodwork, cautioning that uncertainty and unwelcome inflationary impacts from US tariffs will make it harder, not easier, for the Fed to begin cutting rates.

Utterly undeterred, rate traders continue to pile into bets that the Fed will be squeezed into a rate-cutting cycle through the remainder of the year, as negative economic impacts from those exact same tariffs may push the US into a recession. According to the CME's FedWatch Tool, rate swap traders are beginning to price in hopeful bets that a first quarter-point cut may come as early as May. However, the majority of the rate market still sees a 25 bps in July as more likely, with a total of 100 bps or more on the cards by the end of the year.

Fed's Goolsbee: Tariffs are way bigger than anticipated
Fed's Daly: I'm a little concerned inflation may pick back up

US Consumer Price Index (CPI) inflation figures are slated for Thursday, with US Producer Price Index (PPI) inflation and University of Michigan (UoM) Consumer Sentiment Index survey results are both set to publish on Friday. This will be the last blast of key US inflation and sentiment figures from the 'pre-tariff' phase of 2025, marking a key measurement metric for the remainder of the calendar year.

GBP/USD price forecast

GBP/USD caught a bullish break on Tuesday, finding a thin bounce from the 200-day EMA just above 1.2700. Bullish momentum remains borderline anemic, but bidding pressure was just enough to clip a two-day losing streak that saw Cable shed over 3% top-to-bottom.

Bidders will still need to extend from the 200-day EMA before confirming a bullish recovery, but short momentum appears to have evaporated too quickly to allow fresh selling positions.

GBP/USD daily chart