- The market mood is cautious due to uncertainty about the global economic outlook, so compared to the US dollar, Sterling’s pound is 1,2650.
- President Trump said he will soon reveal details of tariffs in the eurozone.
- Investors are awaiting Trump Starker Conference and US PCE inflation data.
The Pound Sterling (GBP) depreciates to around 1.2650 against the US Dollar (USD) during European trading on Thursday. The GBP/USD pair comes under pressure as market participants shift towards safe-haven assets due to uncertainty surrounding U.S. President Donald Trump’s trade policies. This sentiment strengthens the U.S. Dollar Index (DXY), which climbs toward 106.70.
Trump’s Tariff Plans Fuel Risk Aversion
On Wednesday, President Donald Trump indicated that he is prepared to impose tariffs on the Eurozone, stating, “Details on EU tariffs coming soon.” He hinted at a 25% tariff on autos and other goods. While his 10% tariffs on Chinese imports had already laid the foundation for a global trade war, the potential introduction of higher duties on EU imports raises concerns about a wider economic slowdown.
Meanwhile, Trump granted Canada and Mexico an additional one-month extension before implementing tariffs, now set for April 2. Initially, these levies were scheduled for February 4 but were pushed to March 4 following agreements to enhance border security and restrict fentanyl and illegal immigration.
US Dollar Outlook and Economic Indicators
Domestically, the US Dollar’s momentum is slowing due to weaker economic data. The S&P Global US Services PMI contracted for the first time in over two years, while Consumer Confidence for February saw a significant decline. This has led to growing expectations that the Federal Reserve (Fed) may ease its restrictive policy sooner than anticipated. According to the CME FedWatch Tool, there is a 68% probability that the Fed will cut interest rates at its June meeting.
Upcoming Data Releases to Watch
Investors will closely monitor the US Personal Consumption Expenditures (PCE) Price Index for January, set to be released on Friday, for further insights into the Fed’s policy direction. Additionally, Thursday’s economic calendar includes:
- US Durable Goods Orders (January)
- Initial Jobless Claims (week ending February 21)
- Updated US GDP report (Q4 2024)
- Speeches from Fed officials: Michael Barr, Michelle Bowman, Thomas Barkin, Beth Hammack, and Patrick Harker.
Daily Market Update: Pound Sterling Holds Steady Amid Cautious Trading
- The Pound Sterling trades cautiously against its major peers on Thursday as investors await the outcome of United Kingdom (UK) Prime Minister Keir Starmer’s meeting with US President Donald Trump on Thursday. Starmer is expected to negotiate on trade policies between both nations.
- Investors will pay close attention to Trump-Starmer’s meeting, given that the UK is the fifth largest trading partner of the US after Canada, Mexico, China, and Germany, according to data from the US Bureau of Economic Analysis (BEA).
- Trump-Starmer talks on trade policies are expected to be healthy as Trump has never raised any issue regarding unfair trade practices by the UK in his tariff threats since the election campaign. Also, President Trump said in a press conference earlier this month that he is not sure about imposing tariffs on the UK and was confident that a deal could be made as Prime Minister Keir Starmer has been “very nice”.
- Meanwhile, UK Chancellor of the Exchequer Rachel Reeves is confident that trade and investment between the US and the UK would not be derailed by the new US administration. “The last time President Trump was in the White House, trade and investment flows between our two countries increased, and I’ve got every confidence that that can happen again,” Reeves said in an interview with Reuters at the sidelines of the G20 Finance Ministers’ summit.
Technical Outlook: GBP/USD Declines Towards 1.2650 Amid Bearish Pressure
The Pound Sterling (GBP) declines towards 1.2650 against the US Dollar (USD) during Thursday’s European session. The GBP/USD pair remains under pressure near the 200-day Exponential Moving Average (EMA), currently positioned around 1.2680. Despite this, the pair holds above the 38.2% Fibonacci retracement level, measured from the late September high to the mid-January low, which is situated around 1.2620.
The 14-day Relative Strength Index (RSI) remains above 60.00, suggesting that the bullish momentum could persist as long as the RSI holds above this threshold.
On the downside, key support is found at the February 11 low of 1.2333. Conversely, resistance levels are seen at the 50% Fibonacci retracement level of 1.2767 and the 61.8% level at 1.2927, which may act as barriers to further upside movement.
