GBP/USD draws closer to 1.3500 following BoE Bailey's comments

• The US Dollar regains some ground as trade war fears ease.
• The Dollar suffered on Monday amid renewed trade tensions and weak manufacturing data.
• Dovish comments by BoE Governor Bailey are adding pressure on the GBP.

The Pound is drifting lower on Tuesday, approaching the 1.3500 level. A somewhat brighter market mood, with fears about trade tensions easing, has helped an ailing US Dollar to pare some losses, while Bailey's dovish comments have increased pressure on the Pound.

BoE Governour Bailey in his testimony on the May Policy Report, downplayed inflationary pressures stemming from higher tariffs and affirmed that the path for interest rates remains downward. The BoE chief has also warned about the uncertain global economic scenario, which will delay UK businesses' investment decisions. ¡

The pair is coming down from the 1.3560 highs reached on Monday, with investors selling the US Dollar amid concerns about the economic impact of tariffs and the ballooning US federal debt.

Tariff uncertainty is hurting US manufacturing activity

US ISM Manufacturing PMI data confirmed those fears later on Monday. May's reading showed an unexpected deterioration of the sector's activity, while delivery times increased, raising fears of potential shortages of some products. These figures increased negative pressure on the USD.

In the US, the focus will be on April's Factory orders, which will be observed with interest after the downbeat PMI data seen on Monday.  Apart from that, the US JOLTS Job openings will open a string of labour market reports that ends on Friday with the all-important Nonfarm Payrolls report.