The GBP/USD currency pair is battling 1.2550, weighed down by worries about China’s development.

Domestically, the Bank of England’s tightening expectations has cooled. According to BBH analysts, the next meeting on May 5 is fully priced in a 25 bp hike to 1.0 percent, while the swaps market is pricing in 175 bases tightening over the next 12 months, down from 200 bp earlier this week.

Notably, Brexit uncertainty, the UK’s inability to meet NATO expenditure commitments, and concerns over UK PM Boris Johnson’s “right to buy” policy all impose downward pressure on GBP/USD pricing.

Amid these moves, US stock futures gained 0.5 percent, but 10-year Treasury yields climb to 2.93 percent.

However, today’s US ISM Manufacturing PMI for April, projected at 58.0 vs 57.1 before, will be key for intraday trends. On Wednesday, the Fed will meet, and on Thursday, the BOE.

Late 2020 bottom guards the quote’s immediate rebound. Until then, GBP/USD is vulnerable to a retest of the multi-day low of 1.2410.

Conclusion

The previous week’s selling spiral gathered steam, smashing GBP/USD to its lowest level since July 2020. The Fed-BOE monetary policy divergence will remain the dominant subject ahead of policy announcements and NFPs.