As of this writing, the GBP/USD currency pair is up 0.4%. Investors are interested in the release of the US Personal Consumption Expenditures Price (PCE) Index for February. There’s a good chance that the PCE Index won’t move the USD/JPY currency pair much. Market players are on the lookout because of possible retaliatory tariffs, recently declared by US President Donald Trump. The tariffs, along with recent inflation data, are likely to start changing consumer inflation expectations and the overall market landscape.
The Pound Sterling (GBP) has been surprisingly substantive against the most major currencies. Positive retail sales data and revised GDP figures from the United Kingdom (UK) have gone a long way in supporting its strength. The UK’s economy demonstrated robust growth, expanding by 1.5% in the final quarter of 2024, contributing to the Pound’s upward trajectory.
GBP/USD Pair Gains Amid Economic Indicators
The GBP/USD currency pair posted a modest gain, the pairs movement tightly woven to the US economic data set to be released in the coming days. Our expectation is that US core PCE inflation will come in up 2.7% y/y. At the same time, month-on-month growth is forecast to remain solid at 0.3%. However, notwithstanding these forecasts, the general consensus among analysts is that the impact of the PCE Index on the GBP/USD currency pair should be insignificant.
Even the threat of new tariffs has been enough to inject uncertainty into the markets. Consumers and investors alike are braced for changes in consumer inflation sentiment as the effects of these tariffs start to become more widely understood.
“Trade wars are no good for anyone,” – Chancellor Rachel Reeves
This feeling expresses the fear that has taken hold over world markets, as trade war threatens to shatter our fragile economic peace.
Technical Analysis: Support Levels and Indicators
Currently the GBP/USD pair’s 14-day Relative Strength Index (RSI) has plummeted to just above 60.00. It almost recently broke into overbought territory, moving above 70.00. This change is indicative of a more tempered market mood after recent upticks.
At the same time, the 20-day Exponential Moving Average (EMA) still offers a supportive base at about 1.2885. We found major support areas at the 50% Fibonacci retracement of 1.2770. Moreover, we observed an equally important area at the 38.2% Fibonacci retracement level of 1.2615. Short-term traders utilize these important technical indicators to help identify key areas of resistance and support in the currency pair’s path.
UK Economic Data Boosts Pound Sterling
The Pound Sterling has surged above its peers after the positive UK economic data release. Additionally, UK retail sales figures for February beat expectations, providing one more hopeful sign for consumer spending trends. On top of that, upward revisions to the UK’s fourth-quarter GDP numbers underscored a more robust-than-expected economic growth.
Together, the aforementioned developments have driven a surge in confidence in the UK economy. Consequently, the Pound has appreciated against all major currencies, with the notable exception of Japanese Yen (JPY). As the Bank of England (BoE) issues the Pound Sterling, its movements remain closely watched by market participants navigating global financial landscapes.
The US Federal Reserve has raised its prediction for core PCE inflation this year. It raised its projection for the peak fed funds rate, now anticipating it will hit 2.8%, up from its December forecast of 2.5%. This change represents a realignment with new economic realities and illustrates the continued difficulty that policymakers at the Federal Reserve and beyond have had in controlling inflation.