Pound Sterling slumps against US Dollar as Trump threatens reciprocal tariffs

• The Pound Sterling declines to near 1.2630 against the US Dollar as US President Trump threatens to impose reciprocal tariffs.
• President Trump said that he will unveil reciprocal tariffs on April 2.
• Investors await the Trump-Starmer meeting and the US PCE inflation data.

The Pound Sterling (GBP) slides to near 1.2630 against the US Dollar (USD) in North American trading hours on Thursday. The GBP/USD pair faces pressure as the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, jumps higher slightly above 107.00 after threats of reciprocal tariffs from United States (US) President Donald Trump in the US opening session and upbeat US Durable Goods Orders data for January. 

"April 2 reciprocal tariff date remains in full force," Trump said in a press conference. He also threatened to impose an additional 10% tariffs on China. He has already slapped a 10% levy on China earlier this month. On Canada and Mexico, Trump confirmed that 25% tariffs are coming on March 4.

The US Dollar was already outperforming earlier in the day due to uncertainty over Trump's tariff agenda. On Wednesday, US President Donald Trump said he is prepared to announce tariffs on the Eurozone. “Details on EU tariffs coming soon”, Trump said. He added that tariffs to be 25% on autos and other things.

Though the foundation of a global trade war has already been laid by Trump imposing 10% tariffs on all imports from China, higher import duties on the 27-nations bloc and reciprocal tariffs would escalate fears of an economic slowdown across the globe.

On the economic data front, the Census Bureau reported that new orders for durable goods rose at a robust pace of 3.1% against estimates of 2%. In December, the economic data declined by 2.2%.

Meanwhile, US Initial Jobless Claims for the week ending February 21 have come in significantly higher than expected. Individuals claiming jobless benefits for the first time were 242K, higher than estimates of 221K.

Going forward, investors will focus on the US Personal Consumption Expenditures Price Index (PCE) data for January, which will be released on Friday. The inflation data will influence market speculation for the Federal Reserve's (Fed) monetary policy outlook. According to the CME FedWatch tool, there is a 68% chance that the Fed can reduce interest rates in the June policy meeting after leaving them in the current range in the March and May meetings.

Fed dovish bets have lately accelerated due to a contraction in the S&P Global US Services Purchasing Managers Index (PMI) for the first time in more than two years and a big slump in the Consumer Confidence data for February. Weak economic data has also boosted expectations that the Fed's restrictive policy stance won’t last long.

Daily digest market movers: Pound Sterling moves higher while Trump-Starmer meet looms large

• The Pound Sterling gains against its major peers, except the US Dollar, on Thursday, while investors await the outcome of United Kingdom (UK) Prime Minister Keir Starmer’s meeting with US President Donald Trump on Thursday. Starmer is expected to negotiate on trade policies between both nations.
• Investors will pay close attention to Trump-Starmer’s meeting, given that the UK is the fifth largest trading partner of the US after Canada, Mexico, China, and Germany, according to data from the US Bureau of Economic Analysis (BEA).
• Trump-Starmer talks on trade policies are expected to be healthy as Trump has never raised any issue regarding unfair trade practices by the UK in his tariff threats since the election campaign. Also, President Trump said in a press conference earlier this month that he is not sure about imposing tariffs on the UK and was confident that a deal could be made as Prime Minister Keir Starmer has been "very nice".
• Ahead of the Starmer-Trump meeting, Senior Trump Administration Official said that the US wants "reciprocal, equal trade" with the UK.
• On Wednesday, UK Chancellor of the Exchequer Rachel Reeves said she is confident that" trade and investment between the US and the UK would not be derailed" by the new US administration. "The last time President Trump was in the White House, trade and investment flows between our two countries increased, and I've got every confidence that that can happen again," Reeves said in an interview with Reuters at the sidelines of the G20 Finance Ministers’ summit.

Technical Analysis: Pound Sterling continues to face pressure near 200-day EMA

The Pound Sterling declines to near 1.2630 against the US Dollar in Thursday’s North American session. The GBP/USD pair continues to face pressure near the 200-day Exponential Moving Average (EMA), which trades around 1.2680. The Cable holds above the 38.2% Fibonacci retracement from the end-September high to the mid-January low downtrend around 1.2620.

The 14-day Relative Strength Index (RSI) oscillates above 60.00. The bullish momentum remains intact if the RSI (14) holds above that level.

Looking down, the February 11 low of 1.2333 will act as a key support zone for the pair. On the upside, the 50% and 61.8% Fibonacci retracement at 1.2767 and 1.2927, respectively, will act as key resistance zones.