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- GBP/USD appreciates as the US Dollar loses ground amid lower yields.
- Traders await weekly Initial Jobless Claims and Q4 Gross Domestic Product Annualized data from the US on Thursday.
- The weaker UK CPI data has strengthened expectations that the Bank of England may consider easing its monetary policy.
GBP/USD recovers its recent losses from the previous session, climbing to around 1.2910 during Thursday’s Asian session. The pair is strengthening as the US Dollar (USD) remains under pressure due to declining Treasury yields, with the 2-year and 10-year yields hovering at 4.0% and 4.34%, respectively. Market participants are closely monitoring upcoming US economic data, including weekly Initial Jobless Claims and the final Q4 Gross Domestic Product (GDP) Annualized report, set for release later in the day.
However, the upside of the GBP/USD pair could be limited as risk-off sentiment rises amid escalating US trade policies. Late Wednesday, US President Donald Trump signed an order imposing a 25% tariff on auto imports, set to take effect on April 2, with collections beginning the following day. However, a one-month reprieve will be granted for auto parts imports. The move has intensified global trade tensions, adding uncertainty to the markets.
Adding to trade-war concerns, St. Louis Fed President Alberto Musalem issued strong remarks on Wednesday, joining other Federal Reserve policymakers in criticizing the tariff policies. Musalem warned that these measures are unsettling the US economy, increasing uncertainty, and pushing inflation higher.
Meanwhile, the Pound Sterling (GBP) weakened following the release of the UK Consumer Price Index (CPI) report for February, which showed inflation cooling faster than expected. The softer CPI figures have fueled speculation that the Bank of England (BoE) may lean toward monetary easing.
Headline CPI rose 2.8% year-over-year, missing the 2.9% forecast and cooling from January’s 3.0%. Core CPI, which excludes volatile items, increased by 3.5%, below expectations of 3.6% and the previous 3.7% reading. On a monthly basis, headline CPI grew 0.4% after a 0.1% decline in January, falling short of the 0.5% estimate. However, services sector inflation—closely watched by BoE officials—remained steady at 5%.
