During the Asian trading session on Thursday, the Pound Sterling (GBP) maintained its weekly gains, trading around 1.3565 against the US Dollar (USD). The GBP/USD pair showed resilience as the US Dollar faced downward pressure amid ongoing uncertainties regarding the United States’ trade policy outlook. As of the latest update, the US Dollar Index (DXY), which reflects the value of the Greenback against six major currencies, recorded a slight decline, hovering near 97.55.
This pressure on the USD was exacerbated by a recent Supreme Court ruling that deemed President Donald Trump’s tariffs as “unlawful”, arguing they were improperly backed by emergency economic powers. This ruling has triggered concerns within the market that trading partners of the US might seek to renegotiate existing trade agreements to leverage the SC’s decision in their favor. In response, President Trump has issued a warning of potential increased tariffs on nations that attempt to violate current trade deals.
As for the outlook on the Pound Sterling, it remains broadly uncertain. Market anticipation surrounds the Bank of England (BoE), which is expected to announce an interest rate cut in its upcoming monetary policy meeting in March. This forecast adds to the complexities facing the currency in light of global trade tensions.
From a technical analysis perspective, the GBP/USD pairing is trading firmly around 1.3565. This level aligns closely with the 20-day Exponential Moving Average (EMA) at 1.3562, indicating a limit to directional conviction for traders. After a recent pullback from mid-month highs, the price action has stabilized, clustering around the moving average, which suggests a period of consolidation rather than a definitive trend.
The 14-day Relative Strength Index (RSI) currently sits between 40.00 and 60.00, indicating neutral momentum and reinforcing the sideways market tone. Traders are identifying initial support at the February 19 low of 1.3434, with the potential for a decline towards the January 19 low at 1.3344 if the market fails to maintain these levels. Conversely, should the pair achieve a decisive breakout above the February 11 high of 1.3712, it may aim to revisit a near four-year high of 1.3869.
The US Dollar, as the official currency of the United States and a key component of global finance, remains heavily traded, accounting for over 88% of the world’s foreign exchange turnover, with daily transactions averaging $6.6 trillion, according to 2022 data. Its value primarily hinges on monetary policy dictated by the Federal Reserve, which seeks to balance price stability and full employment. The Fed adjusts interest rates as a primary tool to navigate inflation and employment rates, with higher rates generally bolstering the USD’s value.
In dire circumstances, the Federal Reserve may resort to quantitative easing (QE), a measure that increases credit flow by purchasing government bonds, a tactic that typically results in a weaker Dollar. Conversely, when the Fed opts for quantitative tightening (QT), ceasing bond purchases and allowing existing bonds to mature without reinvestment, it is usually supportive of the Dollar’s value.
