Pound Sterling strengthens against US Dollar despite global trade war intensifies
- The Pound Sterling gains sharply to near 1.2750 against the US Dollar as traders have raised Fed dovish bets for the June meeting.
- US President Trump has confirmed that he will impose 25% tariffs on Canada and Mexico and an additional 10% on China.
- The BoE is expected to follow a gradual policy-easing cycle as the UK inflation is set to remain higher.
The Pound Sterling (GBP) posts a fresh two-and-a-half month high around 1.2750 against the US Dollar (USD) in Tuesday’s North American session. The GBP/USD pair strengthens as the US Dollar extends its downside despite an intensifying global trade war. The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, slides below 106.00. Technically, heightening geopolitical tensions improves the appeal of the US Dollar.
In the North American session on Tuesday, Mexican President Claudia Sheinbaum Pardo said that retaliatory tariffs are coming on Sunday as "Trump starts a global trade fight". On Monday, United States (US) President Donald Trump said that 25% tariffs on Canada and Mexico and an additional 10% levies on China to come into effect on Tuesday, which confirmed that fears of a global trade war have become real now. In retaliation, China has also slapped tariffs on major agricultural imports.
On tariffs over China, US Treasury Secretary Scott Bessent said China's business model is to "export, and that is unacceptable." Bessent said he is confident that Chinese manufacturers will "eat the tariffs."
Earlier in the day, Canadian Prime Minister Justin Trudeau also threatened to impose tariffs on the US. Trudeau said that Canada will start with "25% tariffs on US imports worth C$30 billion from Tuesday.
Meanwhile, escalating Federal Reserve (Fed) dovish bets due to a slew of weak US economic data has also weighed on the US Dollar. An expected slowdown in the United States (US) core Personal Consumption Expenditure Price Index (PCE) data for January, a sharp decline in Consumer Confidence for February – the first decline in the Personal Spending data for January in two years – and weak ISM Manufacturing PMI data for February have contributed to market expectations that the Fed could resume the monetary expansion cycle in June.
Traders have raised bets supporting the Fed to resume the policy-easing cycle in the June meeting, which was paused in January. The likelihood for the central bank to reduce interest rates in June has increased to 86.9% from 69% recorded a week ago, according to the CME FedWatch tool.
Going forward, investors will focus on the US ADP Employment Change, US ISM Services PMI, and the US Nonfarm Payrolls (NFP) data for February. All of them will be released during this week and are likely to influence market expectations for the Fed’s monetary policy outlook.
US Dollar PRICE Today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the strongest against the Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.40% | -0.12% | -0.59% | -0.34% | 0.04% | -0.14% | -0.60% | |
| EUR | 0.40% | 0.29% | -0.17% | 0.07% | 0.45% | 0.27% | -0.21% | |
| GBP | 0.12% | -0.29% | -0.47% | -0.22% | 0.16% | -0.02% | -0.48% | |
| JPY | 0.59% | 0.17% | 0.47% | 0.24% | 0.63% | 0.43% | -0.02% | |
| CAD | 0.34% | -0.07% | 0.22% | -0.24% | 0.38% | 0.21% | -0.27% | |
| AUD | -0.04% | -0.45% | -0.16% | -0.63% | -0.38% | -0.18% | -0.65% | |
| NZD | 0.14% | -0.27% | 0.02% | -0.43% | -0.21% | 0.18% | -0.46% | |
| CHF | 0.60% | 0.21% | 0.48% | 0.02% | 0.27% | 0.65% | 0.46% |
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 US Dollar from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent USD (base)/JPY (quote).
Daily digest market movers: Pound Sterling to be influenced by further development in Ukraine peace plan
- The Pound Sterling exhibits a mixed performance across the globe, with investors seeking further development in Ukraine’s peace plan. Over the weekend, pan-European leaders, including Ukrainian President Volodymyr Zelenskyy, agreed to structure a draft for ending the three-year-long war in Ukraine in a high-stakes summit in London.
- On a broader note, the outlook of the British currency remains firm as investors expect the Bank of England (BoE) to follow a gradual monetary expansion approach. These expectations have been bolstered by elevated United Kingdom (UK) wage growth, which could keep inflationary pressures persistently higher.
- Additionally, British Retail Consortium (BRC) Chief Executive, Helen Dickinson, has projected that inflation could rise further as retailers face a 7 billion pound ($8.88 billion) rise in annual costs this year due to a nearly 7% rise in the minimum wage, packaging levies and an increase in payroll taxes announced in UK Chancellor of the Exchequer Rachel Reeves’ Autumn budget, Reuters report.
Technical Analysis: Pound Sterling jumps to near 1.2750
The Pound Sterling demonstrates strength near 1.2750 against the US Dollar on Tuesday. The GBP/USD pair recovered strongly on Monday after a mean-reversion move to the 20-day Exponential Moving Average (EMA) near 1.2580.
The 14-day Relative Strength Index (RSI) climbs above 60.00. A fresh bullish momentum would come into action if the RSI sustains above that level.
Looking down, the February 11 low of 1.2333 will act as a key support zone for the pair. On the upside, the 61% Fibonacci retracement level at 1.2924 will act as a key resistance zone.
Economic Indicator
Nonfarm Payrolls
The Nonfarm Payrolls release presents the number of new jobs created in the US during the previous month in all non-agricultural businesses; it is released by the US Bureau of Labor Statistics (BLS). The monthly changes in payrolls can be extremely volatile. The number is also subject to strong reviews, which can also trigger volatility in the Forex board. Generally speaking, a high reading is seen as bullish for the US Dollar (USD), while a low reading is seen as bearish, although previous months' reviews and the Unemployment Rate are as relevant as the headline figure. The market's reaction, therefore, depends on how the market assesses all the data contained in the BLS report as a whole.
Read more.Next release: Fri Mar 07, 2025 13:30
Frequency: Monthly
Consensus: 153K
Previous: 143K
Source: US Bureau of Labor Statistics
America’s monthly jobs report is considered the most important economic indicator for forex traders. Released on the first Friday following the reported month, the change in the number of positions is closely correlated with the overall performance of the economy and is monitored by policymakers. Full employment is one of the Federal Reserve’s mandates and it considers developments in the labor market when setting its policies, thus impacting currencies. Despite several leading indicators shaping estimates, Nonfarm Payrolls tend to surprise markets and trigger substantial volatility. Actual figures beating the consensus tend to be USD bullish.
Author
Sagar Dua
FXStreet
Sagar Dua is associated with the financial markets from his college days. Along with pursuing post-graduation in Commerce in 2014, he started his markets training with chart analysis.
