The British Pound is stable at 1.2940 against the US Dollar. The comment that investors are now keenly waiting upon is US President Donald Trump’s announcement on reciprocal tariffs, which is scheduled for Wednesday. Despite concerns about potential global trade disruptions, the British currency continues to hover around the 61.8% Fibonacci retracement level, plotted from the late-September high to mid-January low, near 1.2930.
The Bank of England’s monetary policy decisions continue to be a significant factor influencing the Pound’s value. Meanwhile, expectations that Trump’s tariffs will have minimal impact on the United Kingdom (UK) are bolstered by his previous comments in February, expressing uncertainty about imposing such tariffs on the UK.
Monetary Policy and Market Sentiment
The Pound Sterling is influenced by the monetary policy set by the Bank of England (BoE), which issues the currency. The BoE’s main objective is enforcing price stability, keeping the inflation rate at 2%±1%. This year, the monetary authority is expected to be in a cycle of moderate monetary expansion.
Investor confidence in the Pound Sterling is high. Not surprisingly, UK investors are optimistic that the negative effect of Trump’s reciprocal tariffs on the UK’s long-term economic outlook will prove to be negligible. The currency has gained against most of its major peers, excluding the Japanese Yen, which has seen increased demand due to its safe-haven status amid tariff concerns.
A hopeful narrative that downplays the impact on the UK is taking hold. This feeling is supported by Trump’s previous remarks from early February when he said he was unsure about placing tariffs on the UK. This sentiment has so far helped calm market fears and provided a stabilizing boost to confidence in the British pound.
Technical Analysis and Resistance Levels
The Pound Sterling is trading sideways below 1.2940 with the US Dollar showing a mild triangle pattern. The pair remains a little unstable, hovering around the 61.8% Fibonacci retracement level at around 1.2930. On the positive side, the high of 1.3100 from October 15 is an important resistance area. This area might have an important impact on the currency pair’s next directional move.
Backing this technical outlook, the 20-day Exponential Moving Average (EMA) offers support for the pair at 1.2890. Moreover, the 14-day Relative Strength Index (RSI) has cooled to just below 60.00 after going into overbought territory above 70.00.
In the meantime, analysts at Barclays have identified the likeliest targets for a new barrage of reciprocal tariffs from Trump.
“We expect the countries with the largest trade deficits in goods with the US and with the highest tariffs and non-tariff trade barriers could potentially be the target of the reciprocal tariffs.” – Analysts at Barclays
Global Trade Concerns and Currency Movement
Yet, President Trump’s announcement of these tariffs is causing many to fear that we may be on the verge of a global tariff war. This confluence of factors is dramatically upending market dynamics. While the Pound Sterling experiences modest pressure from a US Dollar comeback, Euro buyers are exercising caution ahead of Germany’s preliminary inflation data and Trump’s tariff announcement.
At the same time, safe-haven flows are bolstering bullion as investors flock to safety with heightened fear of an escalating trade war. The Pound Sterling finds itself navigating these complex market forces as traders assess potential impacts on global trade relations and economic forecasts.