GBP/USD falls below 1.2300 after Trump's tariffs imposed | 03 Febrero 2025

Event to pay attention to today:

17:00 EET. USD - ISM Manufacturing PMI

GBPUSD:

The GBP/USD pair continued to fall for the fifth consecutive session, hovering around 1.2270 during Asian trading hours on Monday. The pair weakened by around 1 per cent as the US Dollar Index (DXY), which measures the US dollar against six major peers, gained ground following US President Donald Trump's tariff threats against China, Canada and Mexico.

On Saturday, the U.S. said it would impose 25 per cent tariffs on Canadian and Mexican goods, while Chinese exports would be subject to 10 per cent tariffs. In addition, Canadian energy exports will be subject to a 10 per cent tariff.

Meanwhile, US inflation data reinforced the Federal Reserve's (Fed) stance on the outlook for monetary policy. The personal consumption expenditure (PCE) price index, which the Fed uses to measure inflation, rose 0.3% in December, up from 0.1% in November. On an annualised basis, PCE inflation accelerated to 2.6% from a previous reading of 2.4%, while the core PCE index, which excludes food and energy, remained unchanged at 2.8% y/y for the third consecutive month.

The Pound Sterling (GBP) is exposed to additional downside risks as traders expect the Bank of England (BoE) to resume its policy easing cycle and is likely to cut interest rates by 25 basis points (bps) to 4.5% in February. For now, investors are keeping a close eye on the Bank of England's monetary policy decision next Thursday.

Trading recommendation: Trading mainly with Sell orders from the current price level.

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