GBP/USD steadies near 1.3540 as the US Dollar struggles under global pressure

• GBP/USD pares weekly losses as the US Dollar softens amid concerns over trade and growth.
• UK Manufacturing PMI was revised higher to 46.4 in May, above April's reading, offering some relief over the sector's slowdown.
• UK MPC to testify Tuesday at Monetary Policy Report Hearings; forward guidance in focus.
• Fed Chair Powell avoids policy comments, putting Fed speakers and NFP in the spotlight.

The British Pound (GBP) bounces back at the start of the week, advancing against the US Dollar (USD) on Monday and trimming last week's losses. The GBP/USD pair is rebounding modestly as investors pare back US Dollar holdings amid lingering uncertainty over the global economic outlook.

At the time of writing, the GBP/USD pair is trading near 1.3540, easing from the intraday high of 1.3559. The pair experienced a sharp rally earlier in the day but struggled to maintain gains as buying interest waned amid a cautious market tone.

The US Dollar came under renewed pressure after President Trump announced plans to double tariffs on steel and aluminum imports, a move that reignited global trade tensions. Meanwhile, China pushed back against the latest trade accusations, adding to investor caution and dragging the US Dollar Index (DXY) back toward last week's low, last seen trading around 98.80.

On the data front, the US ISM Manufacturing Purchasing Managers Index (PMI) fell to 48.5 in May from 48.7 in April, marking the sharpest contraction since November 2024 and underlining persistent softness in the sector. In the UK, the S&P Global Manufacturing PMI was revised higher to 46.4 in May, up from the preliminary estimate of 45.1 and improving April's reading, signaling that conditions remain weak but stable in the industrial sector.

Adding to the policy narrative, Bank of England (BoE) policymaker Catherine Mann said the central bank should pay closer attention to the impact of its quantitative tightening (QT) program on financial conditions, especially now that it has begun cutting interest rates. In remarks published by Reuters on Monday, Mann emphasized that "now that the MPC is reducing restrictiveness, we need to consider the differing effects of our policies on different parts of the yield curve and their effects on monetary policy transmission as a more salient issue."

Looking ahead, with risk sentiment still fragile, market participants will closely monitor upcoming speeches from Federal Reserve (Fed) officials this week for fresh insight into the Fed rate path. While Fed Chair Jerome Powell refrained from addressing monetary policy directly in his Monday remarks, traders expect further guidance from policymakers ahead of Friday's US Nonfarm Payrolls (NFP) report.

In the UK, focus shifts to the Services PMI later this week, a key gauge of the economy's largest sector. Meanwhile, BoE Governor Andrew Bailey and other Monetary Policy Committee (MPC) members will appear before Parliament on Tuesday for the Monetary Policy Report Hearings, providing further context on the May rate cut and the BoE's evolving policy stance.