The Pound Sterling (GBP) strengthens against the US Dollar (USD) despite a slight dip in Wednesday's London session. Less aggressive tariff plans from President Trump and expectations of a Bank of England interest rate cut contribute to the GBP's performance.
The Pound Sterling (GBP) is showing strength against the US Dollar (USD) despite edging lower in Wednesday's London session. The GBP/USD pair remains above the crucial support level of 1.2300, bolstered by a less aggressive stance on tariffs from the US administration under President Donald Trump. Trump announced plans for a 10% tariff on Chinese imports on February 1, a significantly lower rate than the 60% he had pledged during his election campaign.
This tempered investor fears and led to a decline in the demand for the US Dollar as a safe-haven asset, as its perceived risk has diminished. The market anticipates the Bank of England (BoE) to lower interest rates by 25 basis points (bps) in February. Economic indicators such as soft UK inflation and retail sales data, weak labor demand, and moderate GDP growth have fueled expectations for a rate cut. However, the BoE remains concerned about high wage growth, a key driver of inflation in the service sector. Average Earnings Excluding Bonuses rose at a robust 5.6%, surpassing estimates of 5.5% and the previous 5.2%. Investors will be closely watching the preliminary S&P Global/CIPS Purchasing Managers Index (PMI) data for January, scheduled for release on Friday. Technically, the GBP/USD pair is attempting to break above the 20-day Exponential Moving Average (EMA) around 1.2360. The pair rebounded from a fresh over-one-year low of 1.2100 on January 13, and the 14-day Relative Strength Index (RSI) has rebounded to near 43.50 from the 20.00-40.00 range, suggesting a potential end to the bearish momentum. Support is anticipated near the October 2023 low of 1.2050, while the round level of 1.2400 will act as key resistance for the pair
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