Pound slips as Trump’s tariff threats fuel risk-off sentiment
Press Hub UCapital
Share:
The Pound Sterling (GBP) fell to 1.2650 against the U.S. Dollar (USD) on Thursday, as market caution intensified over potential U.S. tariffs on the Eurozone. Investors moved into safe-haven assets, pushing the U.S. Dollar Index (DXY) higher to 106.70. Despite domestic resilience, uncertainty surrounding global trade policy weighed heavily on sterling.
President Donald Trump reiterated his intention to impose 25% tariffs on European autos and other goods, further escalating concerns over a broader trade war. While Trump has already implemented 10% tariffs on Chinese imports, expanding these measures to the European Union would amplify global economic slowdown fears. However, Trump extended the tariff deadline for Canada and Mexico until April 2, offering a temporary reprieve to North American trade partners.
Domestically, the U.S. dollar's strength is beginning to show signs of exhaustion. The latest economic data reflected a weakening outlook, with the S&P Global U.S. Services PMI contracting for the first time in over two years and consumer confidence data slumping in February. These developments have reinforced expectations that the Federal Reserve (Fed) may cut interest rates as early as June. The CME FedWatch Tool now assigns a 68% probability of a rate cut at the June policy meeting.
Market participants are closely watching the upcoming U.S. Personal Consumption Expenditures (PCE) Price Index report, the Fed’s preferred inflation gauge, set for release on Friday. In the meantime, Thursday’s session will feature key U.S. data, including Durable Goods Orders, Initial Jobless Claims, and an updated GDP report for Q4 2024, alongside speeches from several Fed policymakers.
Trump-Starmer Trade Talks in Focus
The British pound’s direction could also hinge on UK Prime Minister Keir Starmer’s meeting with Trump on Thursday, where trade policies between the two nations will be a focal point. The UK remains the fifth-largest trading partner of the U.S., and Starmer is expected to negotiate terms that avoid the economic disruptions seen in U.S.-EU relations.
Unlike his aggressive stance toward the EU, Trump has not signaled any major trade concerns with the UK. In a previous press conference, he expressed confidence in striking a trade deal with Starmer, praising the British leader for his "very nice" approach. UK Chancellor of the Exchequer Rachel Reeves also downplayed concerns, noting that U.S.-UK trade flourished during Trump’s previous presidency and expressing confidence in continued investment flows between the two countries.
Technical Outlook: GBP/USD Struggles at Key Levels
GBP/USD is currently under pressure, trading near the 200-day Exponential Moving Average (EMA) around 1.2680. The pair remains above the 38.2% Fibonacci retracement level at 1.2620, which serves as immediate support.
The Relative Strength Index (RSI) on the 14-day timeframe remains above 60.00, indicating that bullish momentum is intact. However, further downside could see GBP/USD testing the February 11 low of 1.2333 as a key support level. On the upside, resistance levels are positioned at the 50% and 61.8% Fibonacci retracements at 1.2767 and 1.2927, respectively.
While short-term sentiment remains cautious, the broader trend for GBP/USD will likely depend on the outcome of Trump-Starmer negotiations and upcoming U.S. inflation data. A favorable trade outlook for the UK, combined with weaker U.S. economic indicators, could provide support for sterling in the sessions ahead.
President Donald Trump reiterated his intention to impose 25% tariffs on European autos and other goods, further escalating concerns over a broader trade war. While Trump has already implemented 10% tariffs on Chinese imports, expanding these measures to the European Union would amplify global economic slowdown fears. However, Trump extended the tariff deadline for Canada and Mexico until April 2, offering a temporary reprieve to North American trade partners.
Domestically, the U.S. dollar's strength is beginning to show signs of exhaustion. The latest economic data reflected a weakening outlook, with the S&P Global U.S. Services PMI contracting for the first time in over two years and consumer confidence data slumping in February. These developments have reinforced expectations that the Federal Reserve (Fed) may cut interest rates as early as June. The CME FedWatch Tool now assigns a 68% probability of a rate cut at the June policy meeting.
Market participants are closely watching the upcoming U.S. Personal Consumption Expenditures (PCE) Price Index report, the Fed’s preferred inflation gauge, set for release on Friday. In the meantime, Thursday’s session will feature key U.S. data, including Durable Goods Orders, Initial Jobless Claims, and an updated GDP report for Q4 2024, alongside speeches from several Fed policymakers.
Trump-Starmer Trade Talks in Focus
The British pound’s direction could also hinge on UK Prime Minister Keir Starmer’s meeting with Trump on Thursday, where trade policies between the two nations will be a focal point. The UK remains the fifth-largest trading partner of the U.S., and Starmer is expected to negotiate terms that avoid the economic disruptions seen in U.S.-EU relations.
Unlike his aggressive stance toward the EU, Trump has not signaled any major trade concerns with the UK. In a previous press conference, he expressed confidence in striking a trade deal with Starmer, praising the British leader for his "very nice" approach. UK Chancellor of the Exchequer Rachel Reeves also downplayed concerns, noting that U.S.-UK trade flourished during Trump’s previous presidency and expressing confidence in continued investment flows between the two countries.
Technical Outlook: GBP/USD Struggles at Key Levels
GBP/USD is currently under pressure, trading near the 200-day Exponential Moving Average (EMA) around 1.2680. The pair remains above the 38.2% Fibonacci retracement level at 1.2620, which serves as immediate support.
The Relative Strength Index (RSI) on the 14-day timeframe remains above 60.00, indicating that bullish momentum is intact. However, further downside could see GBP/USD testing the February 11 low of 1.2333 as a key support level. On the upside, resistance levels are positioned at the 50% and 61.8% Fibonacci retracements at 1.2767 and 1.2927, respectively.
While short-term sentiment remains cautious, the broader trend for GBP/USD will likely depend on the outcome of Trump-Starmer negotiations and upcoming U.S. inflation data. A favorable trade outlook for the UK, combined with weaker U.S. economic indicators, could provide support for sterling in the sessions ahead.