GBP/USD price tests $1.2350 as investors focus on BoE outlook and Trump tariffs

The GBP/USD pair hovered near 1.2350 during Thursday’s European session, reflecting cautious sentiment as market participants evaluate the impact of pending tariff plans from the U.S. President Donald Trump and the Bank of England’s (BoE) dovish outlook. The pair is currently in a range-bound trading phase between 1.2280 and 1.2355, as analysts from UOB Group predict a potential move toward 1.2410 in the medium term, provided that the downside support at 1.2210 remains intact.
The outlook for GBP/USD is clouded by a mix of global and domestic uncertainties. Investors are closely watching the release of the flash UK S&P Global/CIPS PMI data for January, along with further developments on Trump’s tariff policies and the Federal Reserve’s next monetary policy steps.
GBP/USD price movement (Dec 2024 - Jan 2025) Source: TradingView.
BoE interest rate cut looms amid economic concerns
The United Kingdom’s economic outlook remains a focal point as the BoE prepares for its February 6 policy decision. Market expectations have coalesced around a 25 basis point rate cut, driven by weaker retail sales, softening inflation, and a fragile labor market. Adding to the fiscal concerns, UK public sector borrowing in December surged due to higher costs and extraordinary payments, raising the possibility of tighter government spending or tax increases.
Trump’s tariff plans and technical outlook
On the global front, Trump’s proposed 25% tariffs on Canada and Mexico, coupled with a 10% levy on Chinese imports set for February 1, add a layer of uncertainty to global trade dynamics. The ambiguity around further tariff plans has kept investors on edge. Technically, GBP/USD struggles to decisively break above the 20-day Exponential Moving Average (EMA) at 1.2356. The pair finds near-term support at 1.2050, while resistance levels are seen at 1.2400 and the round figure of 1.2410.
In prior analysis, we highlighted how robust wage growth provided temporary support for GBP/USD amid weak labor market data and a dovish BoE outlook. These factors continue to shape the pair’s trajectory.