|

GBP/USD drops below 1.2600 as US Dollar gains on risk aversion

  • GBP/USD falls 0.21% as Trump’s tariff threats fuel safe-haven demand.
  • UK CPI jumps by 3%, exceeding forecasts, but BoE’s easing path remains intact.
  • FOMC minutes in focus as Fed signals no rush to cut rates.

The Pound Sterling (GBP) retreated below 1.2600 during the North American session as housing data in the United States (US) was mixed, while inflation in the United Kingdom (UK) hit its highest level since March 2024. Despite this, the GBP/USD pair trades at 1.2585, down 0.21%.

Pound weakens despite UK inflation surge, as Fed stance limits upside

Risk aversion spurred demand for haven assets like the Greenback after US President Donald Trump threatened to apply 25% tariffs on autos, pharmaceuticals and chips. In the meantime, Housing Starts in the US tumbled in January due to weather disruptions, dropping from 1.515 million to 1.366 million, or a 9.6% plunge.

The US Census Bureau revealed that US Building Permits improved for the same period, with figures rising from 1.482 million to 1.483 million, a 0.1% increase.

Aside from this, investors await the release of the latest Federal Open Market Committee (FOMC) monetary policy meeting. In the last meeting, the Fed tweaked its language, removing the progress on inflation and emphasizing that it “remains somewhat elevated,” a slight hawkish tilt. Since then, most officials adhered to a more neutral stance saying the central bank is not in a rush to ease policy.

This favors a further downside in GBP/USD as the interest rate differential between the UK and the US is reduced, as the Bank of England (BoE) cut rates earlier this month.

Nevertheless, during the European Session, the UK's Consumer Price Index (CPI) rose by 3% in January, exceeding the economists’ forecast of a 2.8% increase. The Office for National Statistics (ONS) blamed the jump in inflation on a smaller-than-expected drop in airfares and rising petrol prices.

Given the fundamental backdrop, GBP/USD might consolidate. The increase in wage growth figures and inflation would be challenging for the BoE, which embarked on an easing cycle. However, a minimum wage of 7% is due to start in April and an economic slowdown paints a stagflationary scenario for the UK.

GBP/USD Price Analysis: Technical outlook

The GBP/USD pair dropped below 1.2600 following the release of US economic data. As risk appetite deteriorates, the Greenback climbs and the pair hits a three-day low of 1.2578. Although the Relative Strength Index (RSI) remains bullish, buyers have lost a step as the RSI aims lower. That said, if the pair drops below the February 5 high of 1.2549, a test of the 50-day Simple Moving Average (SMA) at 1.2463 is on the cards.

On the other hand, buyers reclaiming 1.2600 could challenge the year-to-date (YTD) peak at 1.2639.

(This story was corrected on February 19 at 17:17 GMT to say that risk aversion spurred demand for haven assets, not risk appetite.)

British Pound PRICE Today

The table below shows the percentage change of British Pound (GBP) against listed major currencies today. British Pound was the strongest against the Canadian Dollar.

 USDEURGBPJPYCADAUDNZDCHF
USD 0.13%0.12%-0.47%0.14%0.07%-0.14%-0.07%
EUR-0.13% -0.01%-0.60%0.00%-0.03%-0.27%-0.20%
GBP-0.12%0.00% -0.59%0.02%-0.05%-0.27%-0.19%
JPY0.47%0.60%0.59% 0.59%0.53%0.30%0.39%
CAD-0.14%-0.01%-0.02%-0.59% -0.06%-0.28%-0.21%
AUD-0.07%0.03%0.05%-0.53%0.06% -0.22%-0.14%
NZD0.14%0.27%0.27%-0.30%0.28%0.22% 0.08%
CHF0.07%0.20%0.19%-0.39%0.21%0.14%-0.08% 

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).

Author

Christian Borjon Valencia

Markets analyst, news editor, and trading instructor with over 14 years of experience across FX, commodities, US equity indices, and global macro markets.

More from Christian Borjon Valencia
Share:

Editor's Picks

AUD/USD falls to near 0.7100 after slipping below 50-day EMA

AUD/USD depreciates after registering minor gains in the previous day, trading around 0.7120 during the Asian hours. The technical analysis of the daily chart shows the pair consolidating sideways within a rectangle pattern, as neither bulls nor bears gain control. The AUD/USD pair is holding a slight bearish tone however as it sits beneath both the nine-day and 50-day EMAs.

160.00: USD/JPY back near intervention territory after upbeat US jobs report

US Nonfarm Payrolls beat expectations by a wide margin in May, with 172K jobs added. The US Dollar rebounds after the release, helping USD/JPY recover from its intraday lows. Warnings from Japanese authorities continue to limit upside potential near the 160.00 threshold.

Gold targets $4,300 amid stronger Dollar

Gold faces increasing selling interest and navigates the area of three-month lows near the $4,300 mark per troy ounce on Friday. The precious metal’s decline comes as traders assess the stronger-than-expected NFP, while the bid bias in the Greenback and higher US Treasury yields also collaborate with the retracement.

Cardano hits five-year low even as Hoskinson clarifies "break" isn't an exit

Cardano (ADA) price is down 10% at press time on Friday, extending losses over 30% so far this week amid Charles Hoskinson's clarification that "break" isn't an exit.

Week ahead – Fed countdown begins amid US inflation data and geopolitical risks

Fed Chair Warsh’s first meeting approaches as key US inflation data could reshape expectations. Oil prices remain elevated as US-Iran talks continue; tariffs also return to the spotlight. ECB is expected to hike; will it be a one-off move or is July live?

The US economy defies the rules: 100 days into the Oil shock and the recession signal is still missing

More than three months after the start of the Iran war and the resulting disruption to global energy markets, the US economy continues to display remarkable resilience. The conflict has triggered a sharp rise in Oil prices, reignited inflationary pressures and fueled widespread concerns about a potential economic slowdown.