GBP/USD edges lower below 1.3500 as uncertainty deepens ahead of August 1 tariff deadline

• GBP/USD loses ground as the US Dollar holds ground amid rising risk aversion.
• US Commerce Secretary Lutnick affirmed that August 1 is a firm deadline, though talks will continue beyond that date.
• The BoE may reduce or temporarily halt its sales of long-dated bonds due to subdued demand from traditional buyers.

GBP/USD inches lower after registering more than 0.5% gains in the previous session, trading around 1.3480 during the Asian hours on Tuesday. The pair depreciates as the US Dollar (USD) remains steady as traders adopt caution due to prevailing uncertainty ahead of US President Donald Trump's August 1 tariff deadline.

US Commerce Secretary Howard Lutnick stated unequivocally in a televised interview, "That's a hard deadline, so on August 1, the new tariff rates will come in. However, Lutnick also highlighted that trade discussions will not stop after the deadline, but they're going to start paying the tariffs on August 1."

Additionally, market sentiment deepens due to increasing worries about the Federal Reserve's (Fed) independence. US Treasury Secretary Scott Bessent said the Fed's independence on monetary policy is under threat by its "mandate creep" into non-policy areas. Bessent urged the central bank to undertake a comprehensive review of those activities.

US Treasury Secretary Scott Bessent also called for a reassessment of the Fed as an institution. President Trump's renewed criticism of Fed Chair Jerome Powell for not lowering interest rates has intensified speculation about a possible dismissal.

In the United Kingdom (UK), Thursday's S&P Purchasing Managers Index (PMI) data is expected to reveal the mildest contraction in manufacturing in six months, alongside the strongest services sector growth in nearly a year.

The Bank of England (BoE) may slow or pause its sales of long-dated bonds amid weak demand from traditional buyers such as pension funds. While traders have slightly dialed back expectations for BoE policy easing, they still anticipate two rate cuts in 2025.