GBP/USD Holds above 1.2400 as markets await US PCE inflation data
Press Hub UCapital
Share:
The Pound Sterling remains in consolidation mode against the US Dollar, holding slightly above 1.2400 as investors focus on the upcoming US core PCE inflation report. Rising safe-haven demand for the USD, driven by President Trump’s tariff escalation, adds pressure on GBP/USD, while expectations of Bank of England rate cuts further weigh on Sterling’s outlook.
US Tariffs and Dollar Strength
Trump’s renewed tariff threats have fueled risk aversion, supporting USD demand. The US Dollar Index (DXY) trades near a weekly high of 108.20, as investors brace for 25% tariffs on Canada and Mexico, set to take effect on February 1.
Additionally, Trump warned of a 100% tariff on BRICS nations if they attempt to introduce a new global trade currency to replace the USD. Markets fear that protectionist policies could be inflationary, potentially forcing the Federal Reserve to keep rates higher for longer.
Market Focus: US Core PCE Inflation & BoE Rate Decision
The core PCE price index, the Fed’s preferred inflation gauge, is expected to show a monthly increase of 0.2%, up from 0.1% in November, while annual inflation is forecast to hold steady at 2.8%. A stronger-than-expected print could reinforce the Fed’s "higher for longer" stance, further boosting USD demand.
Meanwhile, the Bank of England is widely expected to resume rate cuts next week, with a 25 bps reduction to 4.50% now priced in. The BoE’s guidance will be critical, as recent inflation data has shown softening price pressures, although wage growth remains elevated.
Technical Outlook: Sterling Faces Key Resistance at 1.2510
GBP/USD has held above 1.2400 since Monday, supported by the 20-day EMA at this level. However, the 50-day EMA near 1.2510 remains a major resistance barrier.
Momentum indicators suggest sideways price action, with the 14-day RSI oscillating between 20-40. If GBP/USD breaks below 1.2400, key support levels emerge at 1.2100 (January 13 low) and 1.2050 (October 2023 low). On the upside, a breakout above 1.2510 could open the door toward 1.2607 (December 30 high).
Outlook: Fed Policy & BoE Expectations to Drive GBP/USD
With US PCE inflation data due today and the BoE decision next week, Sterling remains at risk of further downside. If US inflation surprises to the upside, GBP/USD could face renewed selling pressure. However, a dovish Fed or softer USD sentiment could support a recovery attempt toward 1.2500+ levels.
US Tariffs and Dollar Strength
Trump’s renewed tariff threats have fueled risk aversion, supporting USD demand. The US Dollar Index (DXY) trades near a weekly high of 108.20, as investors brace for 25% tariffs on Canada and Mexico, set to take effect on February 1.
Additionally, Trump warned of a 100% tariff on BRICS nations if they attempt to introduce a new global trade currency to replace the USD. Markets fear that protectionist policies could be inflationary, potentially forcing the Federal Reserve to keep rates higher for longer.
Market Focus: US Core PCE Inflation & BoE Rate Decision
The core PCE price index, the Fed’s preferred inflation gauge, is expected to show a monthly increase of 0.2%, up from 0.1% in November, while annual inflation is forecast to hold steady at 2.8%. A stronger-than-expected print could reinforce the Fed’s "higher for longer" stance, further boosting USD demand.
Meanwhile, the Bank of England is widely expected to resume rate cuts next week, with a 25 bps reduction to 4.50% now priced in. The BoE’s guidance will be critical, as recent inflation data has shown softening price pressures, although wage growth remains elevated.
Technical Outlook: Sterling Faces Key Resistance at 1.2510
GBP/USD has held above 1.2400 since Monday, supported by the 20-day EMA at this level. However, the 50-day EMA near 1.2510 remains a major resistance barrier.
Momentum indicators suggest sideways price action, with the 14-day RSI oscillating between 20-40. If GBP/USD breaks below 1.2400, key support levels emerge at 1.2100 (January 13 low) and 1.2050 (October 2023 low). On the upside, a breakout above 1.2510 could open the door toward 1.2607 (December 30 high).
Outlook: Fed Policy & BoE Expectations to Drive GBP/USD
With US PCE inflation data due today and the BoE decision next week, Sterling remains at risk of further downside. If US inflation surprises to the upside, GBP/USD could face renewed selling pressure. However, a dovish Fed or softer USD sentiment could support a recovery attempt toward 1.2500+ levels.