Pound Sterling Gains Amid Tariff Row

The British pound (GBP) has strengthened against the US dollar (USD) for the second consecutive day. This upward movement follows the delay of US tariff threats on Mexico and Canada. The postponement is due to ongoing negotiations between the involved parties, focused on combating fentanyl trafficking and illegal immigration. 1 The GBP/USD exchange rate is currently trading at 1.2476, reflecting a 0.62% increase.  
Downside Potential and Support Levels

Conversely, a continuation of the bearish trend would depend on the GBP/USD falling below the February 3 high of 1.2436. A breach of this level would open the door for a test of the 1.2400 support level. Further weakness could then lead to a retest of the April 22, 2024 swing low at 1.2299, representing a significant downside target.

Market Dynamics

The pound’s recent gains are clearly tied to the delayed tariffs. The market is reacting to the reduced immediate threat of trade friction with the US. The ongoing negotiations will likely continue to influence the GBP/USD exchange rate in the short term. Traders will be closely monitoring any news or statements emerging from these discussions.

Key Levels to Watch

In summary, the key levels to watch are 1.2503 and 1.2576 on the upside, and 1.2436 and 1.2400 on the downside. A break of any of these levels will likely dictate the short-term direction of the GBP/USD pair. The market’s interpretation of the US-Mexico-Canada negotiations, combined with broader macroeconomic factors, will determine the pound’s overall trajectory against the dollar.