Pound Weakens Against US Dollar As Investors Assess Trump Tariff Outcome
The British pound (GBP) traded sideways around 1.2950 against the US dollar (USD) on Thursday (after hitting a fresh four-month high near 1.2990 the previous day. The GBP/USD pair consolidated as the US dollar steadied after a two-week decline, while investors weighed the consequences of US President Donald Trump’s tariff agenda on cooling inflation pressures and US economic growth. The US Dollar Index (DXY), which tracks the greenback against a basket of six major currencies, edged up slightly to near 103.65, slightly higher than a more than four-month low of 103.20 hit on Tuesday.
On Wednesday, US President Trump threatened to announce retaliatory tariffs on the European Union (EU) after the 27-nation bloc warned it would impose retaliatory duties on 26 billion euros (EUR) worth of US imports. The same continent has vowed to impose additional costs on the US as Trump’s decision to impose 25% tariffs on steel and aluminium imports worldwide comes into effect.
Fears of a potential EU-US trade war have provided a temporary cushion for the US dollar. However, weaker-than-expected US Consumer Price Index (CPI) data for February is expected to cap the greenback’s gains. The US CPI report showed on Wednesday that headline and core inflation slowed at a faster-than-expected pace to 2.8% and 3.1%, respectively. This scenario is not favorable for the US dollar as cooling price pressures increase dovish bets from the Federal Reserve (Fed).
For further cues on inflation, investors will focus on the US Producer Price Index (PPI) data for February, due out at 12:30 GMT. Economists expect the headline PPI to rise by 3.3% year-on-year, slower than the 3.5% increase in January. In the same period, the core PPI – which excludes volatile food and energy prices – is expected to grow at a steady 3.6%.
Source:FXStreet
