- GBP/USD depreciated as Trump expanded tariffs and nullified previous trade agreements with key US allies.
- President Trump raised import duty on steel and aluminum imports to a flat 25% without exceptions or exemptions.
- BoE’s Mann stated that UK businesses may face difficulties in raising prices this year due to job losses.
GBP/USD continues its downward trend for the fourth consecutive day, trading near 1.2350 during Asian hours on Tuesday. The pair weakens amid escalating trade tensions after US President Donald Trump imposed a flat 25% tariff on steel and aluminum imports on Monday, removing all exemptions and nullifying previous trade agreements with key United States’ (US) allies. The move is intended to support struggling domestic industries but increases the risk of a broader trade conflict.
Trump’s proclamations raised the US aluminum tariff from 10% to 25%, eliminating country-specific exemptions, quota deals, and numerous product-specific exclusions for both metals. A White House official confirmed the new tariffs will take effect on March 4, with potential further measures targeting microchips and vehicles in the coming weeks.
Meanwhile, Bank of England (BoE) Monetary Policy Committee member Catherine Mann stated late Monday that United Kingdom’s (UK) businesses may struggle to raise prices this year as job losses and weaker consumer spending dampen inflation, according to the Financial Times. Mann, who is scheduled to speak again, suggested that corporate pricing power is fading, reducing inflationary pressures. BoE Governor Andrew Bailey’s remarks later on Tuesday will also be closely watched.
In economic data, the British Retail Consortium (BRC) Like-for-Like Retail Sales in the UK increased by 2.5% year-on-year in January 2025, slowing from December’s 3.1% gain but surpassing market expectations of 0.2%. BRC Chief Executive Helen Dickinson noted that while the performance remains strong, its sustainability in the coming months remains uncertain.
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
Source: https://www.fxstreet.com/news/gbp-usd-extends-losses-to-near-12350-amid-risk-off-mood-following-trumps-tariffs-202502110409