Pound sterling price steadies against U.S. dollar despite tariff concerns
GBP/USD price chart showing support at 1.2600 and resistance near 1.2680
The pound sterling (GBP) is trading near 1.2635 against the U.S. dollar (USD) in Tuesday’s European session, showing resilience despite renewed tariff threats from President Donald Trump. Investors remain cautious as Trump reaffirmed his plan to impose 25% tariffs on imports from Canada and Mexico, escalating concerns over global trade disruptions.
The US dollar index (DXY) weakened slightly to 106.60, retreating after a strong rebound on Monday. The GBP/USD pair, which had gained earlier in the session, struggled to extend its rally as markets awaited key economic data releases from the United States.
GBP/USD price dynamics (Jan 2025 - Feb 2025) Source: TradingView.
BoE policy uncertainty and market expectations
The Bank of England (BoE) remains at the center of market focus as investors assess its rate-cut trajectory. The central bank recently cut interest rates by 25 basis points (bps) to 4.5%, signaling a gradual policy easing approach. However, BoE Monetary Policy Committee (MPC) member Swati Dhingra has called for faster rate cuts to stimulate consumer demand, arguing that the current stance remains too restrictive.
Traders are now pricing in two more BoE rate cuts for 2025, with expectations that the next move could come after the March policy meeting. Meanwhile, Fed officials remain cautious, emphasizing that Trump’s economic policies add uncertainty to the inflation and interest rate outlook.
Technical outlook: GBP/USD holds above key support
The GBP/USD pair remains above the 1.2600 support level, while the 200-day Exponential Moving Average (EMA) at 1.2680 continues to act as strong resistance. If the pair manages to break above 1.2680, further upside potential could target 1.2767 and 1.2927, the 50% and 61.8% Fibonacci retracement levels, respectively.
The Relative Strength Index (RSI) above 60.00 suggests bullish momentum remains intact, provided the pair stays above key technical levels. However, a break below 1.2600 could push GBP/USD towards 1.2333, a major support zone from February 11.
Market focus: Economic data and BoE speeches
Traders are closely watching upcoming US economic data, particularly the Durable Goods Orders (Thursday) and the PCE Inflation Index (Friday). Additionally, BoE policymakers including Clare Lombardelli, Swati Dhingra, and Deputy Governor Dave Ramsden are scheduled to speak this week, potentially offering further insight into the BoE’s policy direction.
As previously discussed GBP/USD struggles against U.S. trade tensions and BoE rate cut expectations.
