GBP/USD Forecast: Pound Sterling recovery attempts could remain short-lived
- GBP/USD starts the week under strong selling pressure on Trump tariff news.
- The US Dollar benefits from the risk-averse market atmosphere.
- The pair turns technically bearish despite the latest recovery attempt.
GBP/USD declined sharply at the weekly opening and touched its lowest level in two weeks near 1.2250. Although the pair corrects higher and trades above 1.2300 in the European session, it could have a difficult time gathering recovery momentum, with safe-haven flows dominating the action in financial markets.
British Pound PRICE Today
The table below shows the percentage change of British Pound (GBP) against listed major currencies today. British Pound was the weakest against the Japanese Yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 1.10% | 0.69% | 0.20% | -0.16% | 1.06% | 0.51% | 0.06% | |
| EUR | -1.10% | -0.02% | 0.38% | 0.04% | 0.42% | 0.71% | 0.26% | |
| GBP | -0.69% | 0.02% | -0.69% | 0.06% | 0.44% | 0.73% | 0.30% | |
| JPY | -0.20% | -0.38% | 0.69% | -0.36% | 1.01% | 1.22% | 0.52% | |
| CAD | 0.16% | -0.04% | -0.06% | 0.36% | 0.12% | 0.67% | 0.24% | |
| AUD | -1.06% | -0.42% | -0.44% | -1.01% | -0.12% | 0.29% | -0.14% | |
| NZD | -0.51% | -0.71% | -0.73% | -1.22% | -0.67% | -0.29% | -0.43% | |
| CHF | -0.06% | -0.26% | -0.30% | -0.52% | -0.24% | 0.14% | 0.43% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).
Over the weekend, US President Donald Trump delivered on his tariff threats, announcing that they will impose sweeping 25% tariffs on Mexican and Canadian imports and 10% on Chinese goods entering the US. Additionally, Trump told reporters that he would "definitely" impose tariffs on European imports but didn't provide any additional details.
Reflecting the negative impact of this development on risk mood, the UK's FTSE 100 Index is down more than 1%. Furthermore, US stock index futures were last seen losing between 1.3% and 1.9%.
In the second half of the day, the ISM Manufacturing PMI data for January will be featured in the US economic calendar. Unless there is a significant divergence between the market expectation and the data, investors are likely to remain focused on risk perception. A bearish opening in Wall Street, followed by an extended selloff in major equity indexes could boost the USD and force GBP/USD to continue to push lower.
GBP/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart stays below 40, suggesting that the bearish bias stays intact. The pair was last seen trading near 1.2310, where the 100-period Simple Moving Average (SMA) and the ascending trend line align. In case GBP/USD fails to clear this hurdle, technical sellers could retain control. In this scenario, 1.2260-1.2250 (Fibonacci 23.6% retracement of the latest downtrend, daily low) could be seen as next support before 1.2160 (static level) and 1.2100 (static level, end-point of the downtrend).
On the upside, 1.2370 (Fibonacci 38.2% retracement), 1.2400 (200-period SMA) and 1.2450 (Fibonacci 50% retracement) could be seen as next resistance levels.
Tariffs FAQs
Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.
Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.
There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.
During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.
Author
Eren Sengezer
FXStreet
As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.
