Pound Slumps Against US Dollar As Trump Tariffs Threaten Risk-Off Sentiment
The pound sterling (GBP) fell near 1.2650 against the US dollar (USD) in European trading hours on Thursday (27/2). The GBP/USD pair faced pressure as investors flocked to safe-haven assets amid uncertainty over US President Donald Trump’s tariff agenda. The US Dollar Index (DXY), which tracks the greenback against a basket of six major currencies, moved up near 106.70.
On Wednesday, US President Donald Trump said that he was preparing to announce tariffs on the Eurozone. “Details on EU tariffs will be coming soon,” Trump said. He added that the tariffs would be 25% on cars and other goods. While the groundwork for a global trade war was laid by Trump imposing a 10% tariff on all imports from China, higher tariffs on the 27-nation bloc would raise concerns about a global economic slowdown.
Meanwhile, Donald Trump has granted Canada and Mexico another month of extensions to avoid tariffs. “The Canadian and Mexican tariffs will go into effect on April 2nd,” Trump said. The US had previously set a deadline of February 4 for imposing levies on its North American partners, which was pushed back to March 4 after they agreed to tighten border security to curb the flow of fentanyl and illegal immigrants into the economy.
On the domestic front, the US dollar outlook appears to be weakening amid the S&P Global US Services Purchasing Managers’ Index (PMI) contraction for the first time in more than two years and a big drop in Consumer Confidence data for February. The weak economic data has also raised expectations that the Federal Reserve’s (Fed) restrictive policy stance will not last long. According to the CME FedWatch tool, there is a 68% chance that the Fed could cut interest rates at its June policy meeting.
Source: FXStreet
