GBP/USD Forecast: Pound Sterling struggles to gain traction as mood sours
- GBP/USD fluctuates in a narrow channel at around 1.2950 on Monday.
- Safe-haven flows dominate the action in financial markets in the European morning.
- The US economic calendar will not offer any high-impact data releases.
Following Thursday's strong rebound, GBP/USD failed to make a decisive move in either direction on Friday but ended the week marginally higher still. The pair stays in a consolidation phase at around 1.2950 on Monday, while the technical outlook highlights a lack of bullish momentum.
British Pound PRICE Last 7 days
The table below shows the percentage change of British Pound (GBP) against listed major currencies last 7 days. British Pound was the strongest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.06% | -0.18% | -0.16% | -0.07% | 0.24% | 0.75% | -0.29% | |
| EUR | 0.06% | -0.23% | -0.61% | 0.03% | 0.29% | 0.87% | -0.18% | |
| GBP | 0.18% | 0.23% | 0.00% | -0.38% | 0.49% | 1.08% | -0.06% | |
| JPY | 0.16% | 0.61% | 0.00% | 0.07% | 0.37% | 0.92% | -0.15% | |
| CAD | 0.07% | -0.03% | 0.38% | -0.07% | 0.37% | 0.83% | -0.21% | |
| AUD | -0.24% | -0.29% | -0.49% | -0.37% | -0.37% | 0.59% | -0.46% | |
| NZD | -0.75% | -0.87% | -1.08% | -0.92% | -0.83% | -0.59% | -0.97% | |
| CHF | 0.29% | 0.18% | 0.06% | 0.15% | 0.21% | 0.46% | 0.97% |
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).
The negative shift seen in risk mood makes it difficult for GBP/USD to gain traction at the beginning of the week. Investors grow increasingly concerned over a deepening global trade war and its potential adverse impact on the economic outlook.
The Wall Street Journal reported over the weekend that US President Donald Trump's advisers are considering imposing global tariffs of up to 20% on all imports into the US. Moreover, Trump said on Sunday that if he feels that Moscow is trying to block his attempts to end the war in Ukraine, he would impose secondary tariffs of 25%-50% on buyers of Russian oil.
Confirming the risk-averse market atmosphere, the UK's FTSE 100 Index is down nearly 1% on the day, while US stock index futures lose between 0.6% and 1.3%.
The US economic calendar will not feature any key data releases that could grab markets' attention on Monday. Hence, investors will remain focused on headlines surrounding tariffs before the Trump administration shares the details of its new agenda on Wednesday. In case the mood remains sour in the second half of the day, GBP/USD is likely to stay on the back foot.
GBP/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart stays near 50 and GBP/USD fluctuates at around the 20-period, 50-period and 100-period Simple Moving Averages (SMA), highlighting a lack of buyer interest.
GBP/USD could face immediate support at 1.2930 (20-day SMA) before 1.2900 (lower limit of the ascending regression channel) and 1.2800 (200-day SMA). On the upside, resistances could be spotted at 1.3000 (static level, round level) and 1.3050 (mid-point of the ascending channel).
Tariffs FAQs
Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.
Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.
There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.
During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.
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Author
Eren Sengezer
FXStreet
As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.
