Pound Sterling Hovers Around 1.2950 Against US Dollar Amid Trump Tariff Anxieties

On March 13, 2025, at 08:07:19, the Pound Sterling’s exchange rate against the US Dollar is in a consolidation phase, hovering around 1.2950. This comes as investors are deeply concerned about the potential implications of US President Trump’s tariff policies.

Market Movements and Tariff Tensions

The Pound Sterling (GBP) has taken a sideways trading pattern against the US Dollar (USD) on Thursday. This follows a surge the previous day, when it reached a fresh four – month high close to 1.2990. The GBP/USD pair’s consolidation coincides with the US Dollar stabilizing after two weeks of decline. The US Dollar Index (DXY), which measures the dollar’s value relative to six major currencies, has edged up slightly to around 103.65, a marginal increase from the over four – month low of 103.20 it hit on Tuesday.

The root cause of the market’s jitters is the ongoing tariff saga. On Wednesday, US President Trump threatened to impose retaliatory tariffs on the European Union (EU). This came after the 27 – nation bloc announced its intention to levy counter – tariffs on $26 billion worth of US – imported goods. The EU’s move was a response to Trump’s 25% tariffs on steel and aluminum imports worldwide. Fears of an all – out EU – US trade war have provided a temporary boost to the US Dollar. However, the impact may be limited, given the softer – than – expected US Consumer Price Index (CPI) data for February.

Inflation Data and Future Outlook

The February US CPI report, released on Wednesday, showed that both headline and core inflation decelerated more rapidly than anticipated, to 2.8% and 3.1% respectively. This cooling of price pressures has led to increased speculation that the Federal Reserve (Fed) may adopt a more dovish stance, which is not favorable for the US Dollar.

Investors are now eagerly awaiting the US Producer Price Index (PPI) data for February, due to be published at 12:30 GMT. Economists predict that the headline PPI will have increased by 3.3% year – over – year, a slower pace compared to January’s 3.5% increase. Meanwhile, the core PPI, excluding volatile food and energy prices, is expected to grow steadily at 3.6%.

Domestic UK Economic Indicators and BoE Policy

In the UK, investors are bracing for the release of the monthly Gross Domestic Product (GDP) and factory data for January on Friday. These figures are crucial as Bank of England (BoE) policymakers are concerned about the UK’s economic outlook. In the February policy meeting, the BoE revised its annual GDP forecast downwards to 0.75%, from the 1.5% projected in November. BoE Monetary Policy Committee (MPC) member Catherine Mann even advocated for a larger – than – usual 50 – basis – point interest rate cut, expressing concerns about the growth prospects.

The UK economy is forecasted to have grown at a modest 0.1%, in contrast to the 0.4% expansion seen in December. Additionally, the monthly factory data is expected to have declined in January 2025.

Looking ahead, the next major event for the British currency will be the BoE’s monetary policy decision, scheduled for next week. The market expects the BoE to keep interest rates steady at 4.5%, as most officials have signaled a “gradual and cautious” approach to policy easing. In February, the BoE had reduced interest rates by 25 basis points.

Technical Analysis of GBP/USD

From a technical perspective, the Pound Sterling is trading firmly near the four – month high around the psychologically important 1.3000 level against the US Dollar on Thursday. The long – term outlook for the GBP/USD pair appears bullish, as it remains above the 200 – day Exponential Moving Average (EMA), which is approximately 1.2697.

The 14 – day Relative Strength Index (RSI) is above 60.00, indicating a robust bullish momentum. On the downside, the 50% Fibonacci retracement level at 1.2767 and the 38.2% Fibonacci retracement level at 1.2608 will serve as key support zones for the pair. Conversely, the October 15 high of 1.3100 will act as a significant resistance level.

What is the Pound Sterling?

The Pound Sterling (GBP) is the world’s oldest currency, dating back to 886 AD, and is the official currency of the United Kingdom. It ranks as the fourth most – traded currency in the foreign exchange market, accounting for 12% of all transactions, with an average daily turnover of $630 billion in 2022. Its major trading pairs include GBP/USD (also known as ‘Cable’, accounting for 11% of FX trading), GBP/JPY (referred to as the ‘Dragon’ by traders, 3%), and EUR/GBP (2%). The Bank of England (BoE) is responsible for issuing the Pound Sterling.

How do the decisions of the Bank of England impact on the Pound Sterling?

The most crucial factor influencing the value of the Pound Sterling is the monetary policy set by the Bank of England. The BoE’s primary objective is to achieve “price stability”, maintaining an inflation rate of around 2%. Its main tool for this is adjusting interest rates. When inflation is high, the BoE raises interest rates to curb it, making borrowing more expensive. This makes the UK more appealing to global investors, which is generally positive for GBP. Conversely, when inflation is too low, indicating a slowdown in economic growth, the BoE may lower interest rates to encourage borrowing and investment.

How does economic data influence the value of the Pound?

Economic data releases are vital in assessing the health of the UK economy and have a significant impact on the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services Purchasing Managers’ Indices (PMIs), and employment figures can all sway the direction of GBP. A strong economy attracts more foreign investment and may prompt the BoE to raise interest rates, strengthening GBP. Weak economic data, on the other hand, is likely to cause the Pound Sterling to depreciate.

How does the Trade Balance impact the Pound?

The Trade Balance is another important economic indicator for the Pound Sterling. It measures the difference between a country’s export earnings and import expenditures over a specific period. If a country has highly – demanded exports, the increased foreign demand for its goods will boost its currency. Thus, a positive net Trade Balance strengthens the currency, while a negative balance weakens it.