- According to recent trading sessions, it seems clear that the GBP/USD bulls are waiting for more stimulus and strength factors to start a strong upward correction for the GBP/USD pair.
- Its recent gains did not exceed the 1.2483 level before settling around the 1.2445 level at the time of writing the analysis.
- According to licensed trading companies' platforms, the US dollar has risen again against other major currencies after US inflation strengthened widely in January, reducing the chances of the Federal Reserve cutting interest rates more than once in 2025.
GBP/USD Affected by US Inflation Figures
According to forex trading, the GBP/USD exchange rate is trading lower after the Bureau of Labor Statistics told US all-items inflation rose 0.5% on a monthly basis in January from 0.4% in December, exceeding estimates that pointed to 0.3%. The rise pushed the annual inflation rate to 3.0% from 2.9%, putting it a full percentage point above the US Federal Reserve's 2.0% target. According to economists, "US consumer price inflation came in above expectations in January. As a result, the US dollar rose while US stock futures fell as markets delayed the first full interest rate cut until January 2026."
According to the results of the economic calendar data, core US inflation, which excludes volatile items such as food and fuel, doubled to 0.4% monthly in January, exceeding estimates that pointed to 0.3%. The annual core inflation rate rose to 3.3% from 3.2% and exceeded expectations that pointed to 3.2%. As a result, some analysts were quick to interpret the rise in inflation because of seasonal effects, but the increase in seasonality was already part of the expectations that shaped financial market pricing.
Concurrently, investors are looking at any seasonal explanations and now see a higher path for US interest rates because of the data.
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How US tariffs will affect
Generally, the rise in inflation comes before the increase in tariffs on imports, which economists say will add upward pressure on inflation, making the US Federal Reserve cautious. However, US President Donald Trump has reiterated that he wants the Federal Reserve to cut US interest rates, even in the face of rising prices.
Trading Tips:
The British pound is a risk currency and is greatly affected by the improvement in investor sentiment and the positive performance of financial markets. Consequently, be careful to monitor these factors to get the best trading opportunities.
Trump said on his Truth Social account this week: “Interest rates should be lowered, which will go hand in hand with the upcoming tariffs!!! Let’s start rock and roll, America!!!”
This comes after he commented to reporters on January 30 that “Jay Powell and the Fed have failed to stop the problem they created with inflation.” On January 24, he told the World Economic Forum that the Fed should cut US interest rates “a lot,” adding that he would “let you know” if he disagreed with Chairman Jerome Powell’s decisions. At the moment, markets believe that Powell’s hands are tied by inflation, and he will not be able to provide the cuts Trump wants until inflation declines. Unfortunately, this may be later than sooner given Trump’s passion for tariffs. Overall, the current economic and political developments are fully consistent with the continued strength of the US dollar.
The risks to this view are that the Fed errs on the “dovish” side when making future policy decisions, which means that it ends up cutting more and faster over the coming months and years. This means that financial markets now need to reconsider the policy framework in the context of an active US president.
Technical Analysis for the GBP/USD pair today:
The attempts to recover the British pound against the US dollar GBP/USD currency pair, according to the performance on the daily chart, are still limited and the bulls are trying to form an upward channel. Technically, these attempts will not succeed without moving towards the resistance levels of 1.2585 and 1.2740, respectively. On the other hand, and over the same time frame, the return of the bears to the support level of 1.2330 will be important to start moving towards deeper support levels, and expectations will strengthen for an imminent move towards the psychological support of 1.2000. The Sterling Dollar will be affected today by the announcement of the British economic growth reading and the rest of the US inflation figures, in addition to the reaction of investors and markets to the future of US customs tariffs.
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