Pound Sterling holds gains above 1.3500 amid stronger UK data, US tariff uncertainty

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GBP/USD trades in positive territory around 1.3520 in Monday’s early European session.
Trump announced a new global tariff rate boosted to 15%.
The upbeat UK PMI and Retail Sales underpin the Cable.

The GBP/USD pair holds positive ground near 1.3520 during the early European session on Monday. The major pair recovers after falling to four-week lows last week amid renewed concerns over US tariffs. The Bank of England (BoE) External Member Alan Taylor and Federal Reserve (Fed) Bank Governor Christopher Waller are set to speak later on Monday.

The US Supreme Court struck down US President Donald Trump’s sweeping global tariffs on Friday. In response, Trump has responded by lashing out at the court and imposing a blanket 15% levy on imports. Traders weigh the White House’s next steps on tariffs. Uncertainty surrounding US tariffs could undermine the Greenback and act as a tailwind for the major pair in the near term.

“The dollar is enduring a broad-based decline as the market tries to assess implications from the court’s decision,” said Rodrigo Catril, strategist at National Australia Bank in Sydney. “Trump’s tariff regime is still in place with more uncertainty.”

Stronger than expected UK economic data provide some support to the Pound Sterling (GBP) against the US Dollar (USD). Data released on Friday showed that the flash UK S&P Global Purchasing Managers’ Index (PMI) data came in better than forecast in February, and Retail Sales have returned to growth in January.

Traders will shift their attention to the US PPI data on Friday, which might offer clues about the US interest rate path. The headline and core PPI are expected to show a rise of 0.3% in January. If the report shows hotter-than-expected outcomes, this could boost the USD against the GBP in the near term.

Pound Sterling FAQs

What is the Pound Sterling?

The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).

How do the decisions of the Bank of England impact on the Pound Sterling?

The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.

How does economic data influence the value of the Pound?

Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.

How does the Trade Balance impact the Pound?

Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.