The pound rebounded to around 1.2850 against the US dollar during the Asian session on Thursday, marking the third consecutive day of gains. The trend recovery is mainly boosted by market expectations for the upcoming policy tone of the Bank of England (BoE): Sarah Breeden, Deputy Governor of the BoE, will deliver a speech at the MNI online conference;

The speech focuses on the prospects for economic and financial stability in the UK, and is expected to reveal policy directions. Prior to this, the pound briefly came under pressure as data from the Royal Institution of Chartered Surveyors (RICS) showed that the UK House Price Balance Index only increased by 2% in March, far below market expectations of 8%, and even further below the growth rates in January (20%) and February (11%).

This round of tariff escalation overturns the previous 90 day suspension measures and also leads to a resurgence of market risk aversion. For the UK, which heavily relies on an outward oriented economy, this trade concern poses a potential impact:

The UK does not have an advantage in global price competition, especially when competing with Asian countries, "analysts said.

The increasing trade uncertainty has heightened market concerns about the growth prospects of the UK and deepened expectations of loose monetary policy.

Against the backdrop of a weakening domestic housing market and external economic pressures, the market is betting that the Bank of England will initiate a cycle of aggressive interest rate cuts. Deutsche Bank analysts pointed out that BoE may take "decisive action" at the May meeting, cutting interest rates by 50 basis points at once;

The current pricing in the money market shows that the cumulative interest rate cuts over the next six months have approached 100 basis points; The yield of British treasury bond bonds has fallen synchronously recently, reflecting the high sensitivity of the market to policy changes.

BoE may prioritize stabilizing the credit environment to hedge global economic risks A European market strategist added.

Although the Federal Reserve's minutes show a consensus internally on the dual risks of inflation and growth, the policy direction still tends to be cautious. On the Federal Reserve side: Most FOMC members acknowledge that inflation remains high and growth is facing a slowdown;

Emphasize the need to be more cautious in the timing of interest rate cuts; The market expects the Federal Reserve to start cutting interest rates in June and accumulate 75 basis points of interest rate cuts throughout the year. The US dollar is currently facing a dual constraint: on the one hand, stable economic data supports short-term trends, and on the other hand, lower interest rate expectations weaken its medium - to long-term attractiveness.

The current GBP/USD exchange rate is consolidating around 1.2850, but the short-term technical structure shows a stalemate between long and short positions, and the direction of breakthrough is still unclear. Support level: 1.2800 psychological barrier, 1.2755 (this week's low); Resistance level: 1.2885 (last week's high), 1.2950 (key retracement level);

If BoE's dovish stance strengthens, it is possible to revisit the range of 1.2750-1.2700; On the contrary, if there is a correction in market expectations, it may test above 1.2950.

Editor's viewpoint:

The current trend of the pound is driven by multiple complex factors: on the one hand, weak domestic economic data exacerbates market expectations of interest rate cuts; On the other hand, the policy shift and escalation of trade uncertainty on the US side have exerted external pressure on the pound. If the Bank of England really cuts interest rates by 50 basis points in May as expected, the pound may find it difficult to sustain its current rebound in the long term.