The Pound Sterling (GBP) remains stable above 1.2900 against the US Dollar (USD) during Monday’s North American session, as the USD struggles amid concerns regarding the US economic outlook. The US Dollar Index (DXY) hovers near a four-month low of 103.50.
Worries about the US economy have increased following comments from President Trump about potential turbulence stemming from his “America First” policies. He mentioned there is a “period of transition” but did not clarify how his policies might affect economic conditions.
Impact Of Tariffs On Market Forecasts
Trump has announced reciprocal tariffs, including 25% on imports from Canada and Mexico, with adjustments for the USMCA, and increased Chinese import surcharges to 20%. Market analysts note that Trump’s tariff policies could impact inflation and have lowered Goldman Sachs’ Q4 2025 GDP growth forecast to 1.7% from 2.2%, with a 20% chance of recession.
Expectations are growing that the Federal Reserve (Fed) may restart its policy-easing cycle by June. However, Fed Chair Jerome Powell stated that current interest rate policy is satisfactory and that clarity on Trump’s policies is necessary before making changes.
The Pound Sterling has lagged behind other currencies as Bank of England (BoE) member Catherine Mann questioned the need for cautious monetary easing amidst economic volatility. Mann has previously advocated for a larger rate cut, contrasting with other BoE officials’ support for a more gradual approach.
This week will see essential data releases, including US JOLTS Job Openings, UK monthly GDP data for January, and US Consumer Price Index figures for February, which will shape expectations for both the Fed and BoE’s monetary policies.
Technical Outlook For Gbpusd
The technical analysis indicates a potential breakout for GBP against the USD, with targets set above the 61.8% Fibonacci retracement. The long-term outlook for the GBP/USD pair appears optimistic as it stays above the 200-day Exponential Moving Average (EMA).
Tariffs are designed to protect local industries, though opinions differ on their long-term effectiveness. Ahead of the November 2024 presidential election, Trump has indicated plans to use tariffs to bolster the US economy.
What we clearly see here is that Sterling is managing to hold its ground, trading above 1.2900 against the US Dollar, while the dollar itself deals with pressure stemming from questions about the state of the US economy. At the same time, the US Dollar Index is sticking close to its lowest level in four months, hovering near 103.50. None of this is happening in isolation, and recent comments from President Trump have fuelled some of the uncertainty.
Trump has openly acknowledged a “period of transition” due to his “America First” policies, though he has been vague on specifics. His decision to impose tariffs on imports from Canada, Mexico, and China is already influencing market forecasts. A 25% tariff is being applied to Canada and Mexico, albeit with modifications under the USMCA, while Chinese imports face a 20% surcharge. Analysts at Goldman Sachs are reacting to these policies, adjusting their fourth-quarter 2025 GDP growth expectation down to 1.7% from the earlier 2.2%, alongside a 20% probability of recession.
Where does the Federal Reserve fit into this? Markets are now leaning towards the idea that interest rate cuts could resume by June. However, Powell is holding off for now, making it clear that a change in approach would only come once there is a better understanding of Trump’s economic policies. So far, he has made no suggestion that rates need to come down immediately.
Meanwhile, Sterling has not kept pace with gains seen in other currencies, given the uncertainty around the Bank of England’s stance. Mann raised fresh concerns about whether the Bank should be cautious when easing policy, given current economic volatility. She has been one of the more outspoken figures at the BoE, previously pushing for a stronger rate cut. Other policymakers seem more inclined towards a methodical approach, creating a divide in viewpoints.
In terms of economic releases, the coming days bring critical data. From the UK, we will get January’s monthly GDP figures, while in the US, JOLTS job openings and February’s consumer price index report are on the way. These reports could push markets in either direction, depending on how they influence expectations for the BoE and the Fed.
Looking at technical indicators, there is a suggestion that a breakout for GBP/USD remains possible. The pair is staying above the 200-day Exponential Moving Average, and analysts see potential for movement beyond the 61.8% Fibonacci retracement, which would support an upbeat outlook for the pound.
Trade policies remain a major discussion point. Supporters argue that tariffs help domestic industries, while critics question their long-term effects. Trump has made it clear that he intends to rely on tariffs as a tool for economic growth ahead of the November 2024 election. What remains to be seen is how markets will digest these developments in the weeks ahead.
