The British pound remains firm above the 1.2900 level against the U.S. dollar in Thursday’s European session. Renewed weakness in the greenback, fueled by escalating trade concerns following fresh tariff threats from former U.S. President Donald Trump, has bolstered GBP/USD. Investors are closely monitoring tariff developments and upcoming mid-tier U.S. economic data for further cues.
Technical indicators suggest that GBP/USD maintains a bullish bias, with the lower boundary of the ascending regression channel and the 20-day Simple Moving Average (SMA) providing key support at 1.2880. Should the pair dip below this threshold, it could test the next major support at 1.2800, which aligns with the 200-day SMA.
Conversely, the immediate resistance level stands at 1.2960, marked by the 50-period SMA. A break above this level could pave the way for further gains towards 1.3000, a psychologically significant threshold, followed by the mid-point of the ascending channel at 1.3020.
UK Inflation Falls, Pressuring the Pound
Sterling’s upside has been capped by weaker-than-expected inflation data from the United Kingdom. The latest Consumer Price Index (CPI) report, released by the Office for National Statistics, revealed that annual inflation in February slowed to 2.8%, down from January’s 3.0% and below the market expectation of 2.9%. Core CPI, which excludes volatile food and energy prices, also fell short of estimates, rising 3.5% instead of the forecasted 3.6%.
Lower inflation readings have reinforced expectations that the Bank of England (BoE) may adopt a more dovish stance in the coming months. Investors are now awaiting economic projections from the Office for Budget Responsibility (OBR), which will accompany Chancellor Rachel Reeves’ Spring Budget announcement on Wednesday.
U.S. Data and Tariffs in Focus
Market sentiment remains cautious as traders assess the impact of Trump’s latest trade policy remarks. The former president has announced plans to impose a 25% tariff on all car imports to the U.S., effective April 2. Additionally, he warned that tariffs on Canada and the European Union would be “far larger than currently planned” if their economic policies are deemed harmful to U.S. interests.
As geopolitical and trade tensions intensify, the U.S. dollar’s near-term trajectory will be shaped by upcoming economic releases. Later in the day, February’s Durable Goods Orders data is set to be published. A weaker-than-expected reading could exert downward pressure on the greenback, potentially supporting GBP/USD’s recovery above the 1.2900 level.