The British Pound Sterling is under significant pressure this Tuesday as it faces a fresh wave of challenges in European trading hours. The GBP/USD pair continues its downward trajectory, hitting a new weekly low near 1.2350, reflecting the broader bearish sentiment surrounding the currency. The Pound's recent weakness is primarily driven by the robust performance of the US Dollar, buoyed by expectations that the United States' imposition of 25% tariffs on steel and aluminum imports will contribute to inflationary pressures.
The Pound Sterling, the world's oldest currency, has been grappling with mounting challenges. A key factor influencing its value is the monetary policy decisions made by the Bank of England (BoE). Recently, BoE's Monetary Policy Committee member Catherine Mann expressed concerns over weak demand and potential cracks in the labor market during an interview with the Financial Times. Her dovish commentary further contributed to the Pound's decline, as it extended its losing streak against the US Dollar for the fourth consecutive trading day.
Despite recovering to near the 50-day Exponential Moving Average (EMA) around 1.2484, the GBP/USD pair quickly resumed its decline. The pair struggles to gain traction as investors remain cautious, awaiting further clarity on US President Trump's reciprocal tariff plan and Fed Chairman Powell's upcoming testimony. With the 14-day Relative Strength Index (RSI) oscillating within the 40.00-60.00 range, market participants are observing a sideways trend, indicating a lack of clear directional momentum.
The BoE plays a pivotal role in shaping the Pound Sterling's outlook. The central bank's primary objective is "price stability," aiming for a steady inflation rate of around 2%. To achieve this, the BoE may consider lowering interest rates to encourage borrowing for growth-generating projects. Investors eagerly anticipate BoE Governor Andrew Bailey's speech at the University of Chicago Booth School of Business in London, hoping for more insights into future interest rate guidance.
The GBP/USD pair, also known as 'Cable,' is one of the key trading pairs for the Pound Sterling, accounting for 11% of foreign exchange transactions. Other notable pairs include GBP/JPY, referred to as 'Dragon' by traders, and EUR/GBP. Despite its historical significance and widespread use, the Pound is struggling to hold its ground against major peers amidst prevailing uncertainties.
Technical analysis reveals key support zones for the GBP/USD pair at the January 13 low of 1.2100 and the October 2023 low of 1.2050. Meanwhile, resistance is identified at the December 30 high of 1.2607. These levels serve as critical markers for traders seeking to navigate the current market landscape.