The GBP/USD pair has experienced a roller-coaster ride in recent trading sessions. After registering gains, the pair steadied around 1.2450 during the Asian hours on Wednesday before plunging to 1.2387, marking a 0.47% decline. This shift comes as the US Dollar strengthens in response to a hotter-than-expected Consumer Price Index (CPI) report for January, prompting reactions from European policymakers.
The CPI report revealed an unexpected rise in prices, pushing the US Dollar Index (DXY) to near 108.50. This development has strengthened the US Dollar, causing the GBP/USD pair to fall vertically and tumble to near 1.2380 from its intraday high of 1.2450. As a result, the Pound Sterling slipped during the North American session.
Adding to the volatility are rising trade tensions following US President Donald Trump's decision to impose a 25% import tax on steel and aluminium. This move has not only escalated trade war concerns but also brought these tensions closer to Europe. European policymakers are closely monitoring the situation, assessing potential impacts on their economies.
The anticipation surrounding the Federal Reserve's rate cut decisions has been pushed back due to the rising inflation figures in the US. The hotter-than-expected CPI has led to recalibrations of economic forecasts, further complicating the global economic landscape.
These developments pose significant challenges for the GBP/USD pair, with market participants keeping a close watch on forthcoming economic indicators and geopolitical events. The trade war tensions, coupled with the strengthening US Dollar, could continue to exert pressure on the pair.