- The Pound Sterling rises against major peers on Friday, despite concerns over the UK's economic performance.
- Investors are awaiting UK labor market and inflation data for insights into the BoE's policy direction next week.
- The US Dollar weakens as US President Trump delays the immediate imposition of reciprocal tariffs.
The Pound Sterling (GBP) trades near Thursday's high of 1.2560 against the US Dollar (USD) in Friday's European session, showing strength as the US Dollar weakens. This comes after US President Donald Trump instructed the Commerce Department and trade representatives to create a plan for reciprocal tariffs, which weighed heavily on the USD. Trump emphasized that the tariffs would "level the playing field for all US companies," contributing to market expectations that higher tariffs would boost local manufacturing and labor demand, putting pressure on the Fed to maintain a restrictive policy stance.
As a result, the US Dollar Index (DXY) is near a two-week low around 107.00. Market participants are also watching for US Retail Sales data for January, with a decline of 0.1% expected after December's 0.4% increase.
Daily Market Movers: Pound Sterling Gains Ahead of UK Employment and Inflation Data
- The Pound Sterling is rising against most major peers, despite concerns over the UK's economic outlook. Investors are focused on upcoming UK labor market and inflation data, which could influence market expectations regarding the Bank of England’s (BoE) next steps.
- The BoE's recent decision to halve its GDP growth forecast for the year to 0.75% weighed on investor sentiment, even though the UK economy unexpectedly expanded by 0.1% in Q4 2024, and GDP growth in December was stronger than expected at 0.4%.
- The UK’s labor market data for the three months ending December and Consumer Price Index (CPI) data for January, both due next week, will be key in shaping speculation about whether the BoE will cut rates further at its March meeting, following its 25 basis point reduction to 4.5% earlier in February.
Technical Analysis: Pound Sterling Holds Above 50-Day EMA
GBP/USD has strengthened, reaching a six-week high near 1.2570 after breaking above the 50-day Exponential Moving Average (EMA) around 1.2490 on Thursday. The 14-day Relative Strength Index (RSI) is approaching 60.00, and if it holds above this level, bullish momentum is likely to continue.
On the downside, the February 3 low of 1.2250 provides key support, while the 38.2% and 50% Fibonacci retracement levels at 1.2610 and 1.2767 act as resistance zones for the pair.
