Yesterday, I pointed out how the pound failed to sustain its rally above 1.2675. During the New York session, GBP/USD bulls made another attempt, pushing the pair to 1.2716, but they failed to secure a close above 1.2675. The market quickly reversed, dragging the pair back into its recent range.
If GBP/USD can’t break and hold above 1.2675 convincingly, the bears remain in control, making a downside move more likely.
While the UK seems to be flying under President Trump’s radar for now, it’s clear that the pool of nations not facing his tariff threats is rapidly shrinking. A full-scale trade war could put the pound under further pressure, as global price increases inevitably spill over.
The UK’s data calendar is light this week, but the US has enough economic updates to keep investors on edge. On Thursday, we’ll get a look at Q4 2024 GDP figures, along with January’s Durable Goods orders – numbers that could set the tone for the latter half of the trading week.
However, the main event this week will be Friday’s release of US Personal Consumption Expenditure (PCE) inflation. With US inflation metrics already ticking up at the start of 2025, the real question for investors is whether this will spill into core inflation. If it does, expect further volatility in the markets as the inflation narrative continues to unfold.
