The British Pound Sterling (GBP) faced pressure as it fell against the US Dollar (USD), with the GBP/USD exchange rate dropping from approximately 1.2430 to 1.2408. The decline in Sterling was driven by several factors, including statements from US Federal Reserve officials and mounting worries about the UK's economic outlook. Meanwhile, US equities maintained their upward trend, providing some traction for the Dollar.
Federal Reserve speakers have been a pivotal force behind the Dollar's strength. Governor Michelle Bowman emphasized that inflation risks remain skewed to the upside, reinforcing support for the USD. Additionally, Chicago Fed President Austan Goolsbee expressed satisfaction with December's inflation report, indicating confidence that inflation is steadily approaching the 2% target. These remarks bolstered the Greenback, which saw gains reflected in a 0.20% increase in the US Dollar Index (DXY).
In the UK, concerns about an economic slowdown exerted additional pressure on the Pound. The budget presented by Chancellor Rachel Reeves further fueled anxiety over the country's economic prospects. The GBP/USD pair has been trending downward since encountering resistance at the 50-day Simple Moving Average (SMA) near 1.2500. It currently trades at 1.2398, marking a 0.16% decrease.
The depreciation of Sterling was consistent with a broader trend among G10 Forex currencies, most of which saw declines. In the face of these challenges, the next support for Sterling could be found at January's 23 low of 1.2292, prior to potentially testing the January 17 swing low of 1.2159.
Adding to the complexity of the financial landscape, US President Donald Trump's rhetoric on tariffs sent shockwaves through the markets. This contributed notably to the losses experienced by the Pound Sterling, while providing further support to the Greenback.
The Core Personal Consumption Expenditures (PCE) Price Index registered a 0.2% month-on-month increase, aligning with expectations. This release, coupled with earlier comments from Fed Governor Bowman, lent additional momentum to the US Dollar's ascent.