GBPUSD is moving in an Ascending channel and the market has reached the higher low area of the channel
#GBPUSD Analysis Video
The Pound Sterling (GBP) is struggling in the market, facing downward pressure due to several key factors. One of the biggest influences is the dovish stance taken by the Bank of England’s (BoE) Monetary Policy Committee (MPC) member Catherine Mann. Meanwhile, global trade tensions are also rising as former US President Donald Trump announces hefty tariffs on steel and aluminum imports.
Let’s break down what’s happening, why it matters, and what investors are watching next.
Catherine Mann’s Shift: Why It Matters for the Pound
Catherine Mann, a long-time advocate for higher interest rates, surprised investors with her recent comments. In an interview with the Financial Times, she explained why she now supports bigger interest rate cuts.
What Changed?
Mann stated that demand conditions in the UK have weakened significantly. As a result, she now believes that financial conditions need to be adjusted to better support the economy. This is a major shift from her previous stance, where she was among the more hawkish members of the BoE.
She also expressed confidence that inflation will soon align with the BoE’s 2% target and predicted a sharp decline in employment. This statement signals that the UK’s labor market might not be as strong as previously thought.
BoE’s Recent Rate Cut
Last week, the BoE cut its key interest rate by 25 basis points (bps), bringing it down to 4.5%. While the majority of the MPC members supported this move, Mann, along with Swati Dhingra, pushed for an even larger cut. This suggests that concerns over weak demand and economic slowdown are growing within the BoE.
Investors are now paying close attention to BoE Governor Andrew Bailey’s upcoming speech for more clues on future interest rate policies. Any signs that the central bank may adopt a more aggressive easing approach could further impact the Pound’s performance.
Trump’s Tariffs: How They Add to Market Uncertainty
Trade tensions are heating up again, and this time, they’re putting pressure on global markets, including the Pound.
GBPUSD is moving in a descending channel and the market has fallen from the lower high area of the channel
What Are the New Tariffs?
Former US President Donald Trump signed executive orders imposing a 25% tariff on all steel and aluminum imports. Unlike previous tariff measures, this time no country is exempt. These new tariffs are set to take effect on March 4.
In addition, Trump has hinted at more reciprocal tariffs in the coming days. This means that other countries could retaliate by imposing their own tariffs on US goods, escalating trade disputes further.
Why Does This Matter?
These tariffs could lead to higher prices for imported metals in the US, which in turn could drive inflation. If businesses pass these increased costs to consumers, the US Federal Reserve (Fed) may be forced to delay interest rate cuts.
This uncertainty has strengthened the US Dollar (USD), making it more attractive to investors. As a result, the Pound Sterling has come under additional pressure against the USD.
What’s Next? Key Events to Watch
The market is now waiting for further signals from central banks and key economic data releases. Here’s what’s coming up next:
1. BoE Governor Bailey’s Speech
Investors will be closely watching BoE Governor Andrew Bailey’s speech at the University of Chicago Booth School of Business in London. His comments could provide insights into how the central bank plans to navigate the weakening economy.
GBPUSD is moving in a downtrend channel and the market has fallen from the lower high area of the channel
2. Fed Chair Powell’s Testimony
Fed Chair Jerome Powell is scheduled to testify before Congress. His remarks could indicate whether the Fed is still considering rate cuts or if inflation concerns will keep rates higher for longer. Powell has previously stated that the Fed needs to see “real progress in inflation or at least some weakness in the labor market” before making any policy changes.
3. US Inflation Data Release
The upcoming US Consumer Price Index (CPI) report for January will be a major market mover. If inflation remains high, it could delay the Fed’s rate-cutting plans, further strengthening the US Dollar and putting more pressure on the Pound.
Final Thoughts: What This Means for Investors
The Pound Sterling is currently facing multiple challenges—from a shifting stance by the BoE to rising global trade tensions. Catherine Mann’s dovish comments suggest that the UK economy might be weaker than expected, while Trump’s tariffs are adding more uncertainty to global markets.
With important speeches and economic data on the horizon, the next few days could bring significant market movements. Investors will be keeping a close eye on central bank guidance and inflation trends to determine what’s next for the Pound and the broader financial markets.
If you’re watching the currency market, expect volatility ahead as traders react to these unfolding developments.
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