• The Pound Sterling trades sideways against the US Dollar above 1.2400 as investors focus on the US PCE inflation data for December.
• President Trump’s tariff threats on BRICS and its North American peers have increased USD’s safe-haven appeal.
• Investors expect the BoE to resume the interest rate-cut cycle on Thursday.

The Pound Sterling (GBP) trades in a tight range slightly above the key support of 1.2400 against the US Dollar (USD) in Friday’s European session. The GBP/USD pair steadies despite an increase in the US Dollar’s safe-haven demand on Thursday after United States (US) President Donald Trump reiterated his intentions to impose 25% tariffs on Canada and Mexico from Saturday and 100% on BRICS if they try to replace the US Dollar with a new currency in international trade.

The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades close to its weekly high of 108.20. 

On his social media platform, TruthSocial, Trump said, "We are going to require a commitment from these seemingly hostile countries that they will neither create a new BRICS currency nor back any other currency to replace the mighty US Dollar, or they will face 100% tariffs." He added that there is no chance that “BRICS will replace the US Dollar in International trade” or anywhere else, and any country that tries should say, “Hello to Tariffs, and goodbye to America!"

Market participants believe that President Trump's higher tariffs would be inflationary for the US economy, which could force the Federal Reserve (Fed) to keep interest rates at their current levels for longer. On Wednesday, the Fed announced a pause in the easing policy cycle and kept borrowing rates unchanged in the range of 4.25%-4.50%. 

Fed Chair Jerome Powell said that monetary policy adjustments will become appropriate when central bank officials see “real progress on inflation or at least some weakness in the labor market.”

In Friday’s session, investors will pay close attention to the US Personal Consumption Expenditures Price Index (PCE) data for December, which will be published at 13:30 GMT. The core PCE inflation, the Fed’s preferred inflation gauge, is estimated to have grown at a faster pace of 0.2% month-on-month from 0.1% in November, with annual figures growing steadily by 2.8%. 
 

Daily digest market movers: Pound Sterling underperforms peers on dovish BoE bets

• The Pound Sterling is under pressure against its major peers on Friday, with investors focusing on the Bank of England’s (BoE) monetary policy decision next Thursday. Traders are confident that the BoE will resume the policy-easing cycle and reduce interest rates by 25 basis points (bps) to 4.5%.
• The BoE’s monetary policy guidance could be dovish, as recent inflation indicators have shown signs of deceleration, although wage growth remains accelerating.  
• Financial market participants are pricing in three interest rate cuts from the BoE this year amid faltering labor demand and weakening business confidence. This is due to higher employer contributions to National Insurance (NI) announced by Chancellor of the Exchequer Rachel Reeves in the Autumn budget.
• However, Reeves strives to cool dissatisfaction among business owners by adopting significant measures to boost growth. In her speech at Oxfordshire on Wednesday, Reeves vowed to support the expansion of London's Heathrow Airport and to remove "stifling and unpredictable" regulations to boost productivity. She was also confident about building better trade relations with the US under Donald Trump's leadership.
   

British Pound PRICE Today

The table below shows the percentage change of British Pound (GBP) against listed major currencies today. British Pound was the strongest against the Euro.

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).
 

Technical Analysis: Pound Sterling stays above key support of 1.2400

(Click on image to enlarge)

The Pound Sterling has held the key support of 1.2400 against the US Dollar since Monday. The near-term outlook for the GBP/USD pair remains firm as it holds the 20-day Exponential Moving Average (EMA), which trades around 1.2400. However, the 50-day EMA near 1.2510 remains a major barrier for the Sterling bulls.

The 14-day Relative Strength Index (RSI) oscillates in the 20.00-40.00 range, suggesting a sideways trend.

Looking down, the January 13 low of 1.2100 and the October 2023 low of 1.2050 will act as key support zones for the pair. On the upside, the December 30 high of 1.2607 will act as key resistance.

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