Pound sterling price declines as Trump tariff threats weigh on market sentiment
Pound Sterling weakens amid trade tensions and market caution
The Pound sterling (GBP) weakened against the U.S. Dollar (USD) on Thursday, dropping to 1.2650 in European trading hours. The risk-off sentiment was fueled by U.S. President Donald Trump’s renewed tariff threats, prompting investors to shift towards safe-haven assets such as the U.S. Dollar.
The U.S. Dollar Index (DXY) climbed near 106.70, reflecting a stronger greenback amid heightened global trade tensions.
Trump’s recent statement signaled that tariffs on the Eurozone are imminent, with a 25% levy on automobiles and additional duties on other sectors. While Trump has already imposed 10% tariffs on Chinese imports and 25% duties on steel and aluminum, expanding these measures to the 27-nation Eurozone would escalate global economic slowdown concerns. Meanwhile, Trump granted Canada and Mexico another month-long extension, delaying tariffs until April 2.
GBP/USD price prediction (Jan 2025 - Feb 2025) Source: TradingView.
Pound sterling awaits trade negotiations and economic data
Beyond tariff tensions, investors are closely monitoring the upcoming Trump-Starmer meeting, where UK Prime Minister Keir Starmer is expected to discuss trade relations with the U.S.. Given that the UK ranks as the fifth-largest U.S. trading partner, these discussions could provide market clarity regarding potential trade deals.
Unlike other nations, the UK has not been directly targeted by Trump’s trade restrictions. During a recent press conference, Trump noted he was unsure about imposing tariffs on the UK and expressed confidence in securing a favorable trade agreement with Starmer’s administration. Similarly, UK Chancellor Rachel Reeves downplayed concerns over trade disruptions, citing previous economic growth under Trump’s first term.
Additionally, market participants await critical U.S. economic data, including the PCE inflation report, Durable Goods Orders, and U.S. GDP updates. The Federal Reserve’s monetary policy trajectory remains in focus, as expectations for a June interest rate cut have increased to 68%, according to the CME FedWatch tool.
Technical analysis: GBP/USD holds above key support
The GBP/USD pair is hovering near 1.265, facing resistance around the 200-day Exponential Moving Average (EMA) at 1.268. While GBP remains under pressure, it holds above the 38.2% Fibonacci retracement level at 1.262, signaling potential technical support.
The 14-day Relative Strength Index (RSI) remains above 60.00, suggesting bullish momentum if GBP maintains strength above key support levels. If selling pressure persists, the February 11 low of 1.2333 could serve as the next critical support zone. On the upside, key resistance levels stand at 1.2767 (50% Fibonacci) and 1.2927 (61.8% Fibonacci retracement).
Outlook: Tariff developments and Fed policy in focus
Market sentiment remains fragile, with investors assessing the potential impact of Trump’s trade policies on global economic stability. GBP/USD’s near-term direction will largely depend on US-UK trade negotiations, tariff announcements, and upcoming US economic data. If Trump escalates trade measures against the Eurozone, risk aversion could further strengthen the US Dollar, putting additional pressure on the Pound Sterling.
As previously discussed GBP/USD declined amid U.S. tariff threats and global trade uncertainty. Investors await U.S. economic data and the Trump-Starmer meeting for further direction.
