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The Pound Sterling is navigating a turbulent week, holding its ground near 1.2600 against the US Dollar despite a confluence of economic and political pressures. While set for its first monthly gain since September 2024, the currency remains vulnerable as global uncertainties mount.
Key US economic data released today showed the Federal Reserve’s preferred inflation gauge, the Core Personal Consumption Expenditures (PCE) Price Index, rising 2.6% year-over-year, aligning with estimates and signaling a stall in the disinflation process. However, it remains close to the Fed’s target. Headline inflation also met expectations, expanding to 2.5% YoY.
Adding to market anxieties, former President Donald Trump confirmed his intent to impose 25% tariffs on goods from Mexico and Canada starting next week, alongside further tariffs on Chinese imports. This trade rhetoric has heightened concerns about potential economic disruptions and inflationary pressures.
Meanwhile, Federal Reserve officials, including Cleveland Fed’s Beth Hammack, are closely monitoring the impact of tariffs, acknowledging the uncertainty surrounding their effects on the economy and monetary policy. Hammack stated that a rate hike is not currently in her forecast, while emphasizing that inflation expectations remain anchored.
Across the Atlantic, Bank of England (BoE) Governor David Ramsden shifted his stance, stating that inflation risks are now balanced, no longer tilted to the downside, implying that interest rate policy could move either way.
GBP/USD Technical Outlook:
Technically, the GBP/USD has managed to recover some lost ground, but the overall trend remains slightly bearish within its 1.2549 to 1.2700 consolidation range. For buyers to gain significant traction, they must break above the 1.2700 level, followed by the 200-day Simple Moving Average (SMA) at 1.2785. A move above 1.2800 would signal further bullish momentum.
Conversely, if sellers maintain control and prevent the pair from closing above 1.2600, a retest of the February 5 daily peak at 1.2549 is likely. A break below this level could pave the way for a challenge of the 50-day SMA at 1.2457.
