The Pound Sterling (GBP) is currently struggling to surpass the 1.2600 level against the US Dollar (USD) but is on track for its first monthly gain since September 2024. The Core Personal Consumption Expenditures (PCE) Price Index increased by 0.3% month-on-month in January, with a year-over-year rise of 2.6%, indicating stalled disinflation.

US President Donald Trump announced 25% tariffs on goods from Mexico and Canada, as well as an additional 10% on China. Cleveland Fed official Beth Hammack mentioned no immediate rate hike is expected, given anchored inflation expectations.

The Bank of England’s David Ramsden stated the risks related to achieving the 2% inflation target are now two-sided. The GBP/USD pair is trading within the 1.2549 to 1.2700 range, with necessary resistance at 1.2700 and the 200-day Simple Moving Average at 1.2785 to extend gains.

If GBP/USD does not close above 1.2600 daily, a decline to the February 5 peak of 1.2549 could occur, followed by a potential test of the 50-day SMA at 1.2457. The Pound Sterling remains the fourth most traded currency globally, constituting 12% of all transactions, and is influenced by monetary policy, economic data, and trade balance indicators.

The Pound has been making attempts to rally past the 1.2600 mark against the Dollar but has not yet managed to establish itself above that level. Still, it looks set to record its first monthly advance since September of last year, which could provide confidence to those watching price action closely.

Meanwhile, the Core PCE Price Index—the Federal Reserve’s preferred inflation measure—showed a 0.3% increase for January, bringing year-over-year figures to 2.6%. This suggests that the slowdown in inflation has stalled, which is highly relevant to anyone gauging potential monetary policy moves in the United States. A slower pace of disinflation means there’s less immediate pressure on the Fed to cut interest rates, a scenario that, all else being equal, tends to support the greenback.

On the trade front, Donald’s announcement of new tariffs—25% on imports from Mexico and Canada, and an extra 10% on goods from China—adds another layer of complexity for markets. A trade war poses risks to global supply chains and inflation, making it something we must monitor for its broader effects on currency valuation.

Beth made it clear that the Federal Reserve sees no reason for an immediate rate increase since inflation expectations remain under control. While this doesn’t change the current interest rate environment, it does reinforce the idea that rate cuts will only come once price pressures ease convincingly.

From the Bank of England’s side, David pointed out that inflation risks now come from both higher and lower pressures, rather than clearly leaning in one direction. This suggests policymakers are in no rush to move interest rates in either direction, especially while core inflation dynamics remain uncertain.

Right now, the Pound is moving between 1.2549 and 1.2700, with any attempt to push higher facing resistance at 1.2700. A breakthrough would then need to clear the 200-day Simple Moving Average at 1.2785 before further upside momentum could develop. If prices fail to exceed 1.2600 at the close of a trading day, the next area to watch sits at 1.2549, aligned with the February 5 peak. Below that, the 50-day Simple Moving Average at 1.2457 stands as the next technical marker.

Sterling continues to hold its place as the fourth-most traded currency, accounting for 12% of global transactions, which underscores just how exposed it is to economic data, central bank policies, and trade developments.