GBP/USD Holds Above 1.2400, China Tariffs In Focus
GBP/USD continued to strengthen for the second straight session, trading around 1.2430 during Asian hours on Tuesday (4/2). The currency pair improved amid improved risk sentiment after US President Donald Trump announced late Monday that he would halt tariffs on Mexico and Canada
However, market volatility remains a concern, with investors closely monitoring developments in ongoing tariff negotiations. President Trump said he would suspend high tariffs on Mexico and Canada after their leaders agreed to deploy 10,000 troops to the US border to combat drug trafficking. Tariffs on Mexico and Canada have been put on hold for at least 30 days.
The decision to suspend tariffs comes just two days after Trump imposed 25% tariffs on Mexican and Canadian goods and 10% tariffs on imports from China. China will be hit with the across-the-board tariffs starting at 05:00 GMT on Tuesday. However, Trump said on Monday afternoon that talks with China would take place “probably in the next 24 hours.” He also said, “If we can’t make a deal with China, then the tariffs are going to be very, very large.”
The US Dollar Index (DXY), which measures the US Dollar (USD) against a basket of six major currencies, was steady around 108.70 at the time of writing after losing most of its gains in the previous session. However, upbeat US economic data could provide some support to the greenback. The ISM Manufacturing PMI rose to 50.9 in January from 49.3 in December. This reading was better than the estimate of 49.8.
The GBP/USD pair’s gains could be capped as the Pound Sterling (GBP) may face risks on expectations that the Bank of England (BOE) will restart its policy easing cycle, possibly cutting interest rates by 25 basis points (bps) to 4.5% on Thursday.
Traders are anticipating a dovish stance from the Bank of England amid signs of slowing inflation, despite rising wage growth in the United Kingdom (UK). The BoE's Monetary Policy Committee (MPC) is expected to vote 8-1 in favor of cutting interest rates by a quarter point to 4.5%, with one member likely to advocate keeping rates unchanged for the next meeting.
Source: FXStreet
