The pound sterling rises against the dollar
Markets are closely watching the release of January’s US Consumer Price Index data. Expectations indicate that the YoY inflation will remain steady at 2.9%, unchanged from last month, while core inflation may ease slightly from 3.2% to 3.1%.
In his testimony before Congress, Federal Reserve Chairman Jerome Powell signalled a cautious stance on interest rate adjustments, emphasising that the Federal Open Market Committee will remain “patient” in considering cuts. If inflation continues to stray from the 2% target, the likelihood of maintaining current interest rates through the first half of 2025 increases.
Markets currently anticipate just one rate cut this year. Meanwhile, President Trump’s policies may complicate the Fed’s ability to ease rates. His agenda—including tax cuts, measures to curb illegal immigration, and new tariffs—could fuel inflationary pressures. Notably, his recent 25% tariff on all steel and aluminium imports may trigger retaliatory tariffs from US trade partners, further impacting inflation and economic stability.
What about the Pound Sterling
The pound is awaiting the release of preliminary UK GDP data for Q4 2024. The UK economy saw its strongest growth in over 18 months, with GDP rising from 0.7% in Q2 to 0.9% in Q3. The upcoming report will highlight the impact of consumer and corporate spending, as well as government expenditures, on economic growth. Forecasts suggest annual growth may stabilise at 1% in Q4.
GBP/USD is trading within a horizontal range so what’s next
Key levels to watch in a bearish scenario
Currently, GBP/USD is trading between 1.2344 and 1.2548. A daily close below the low end of this range could encourage further declines toward 1.2099. In this case, the support level located at the February 3 low mentioned above should be monitored.
GBP/USD Daily Price Chart
