GBPUSD:
The GBP/USD pair starts the new week on a weaker note and loses some of Friday’s strong gains to the psychological 1.2500 mark, or nearly three-week peak. Spot prices are currently trading around 1.2460, down 0.20% on the day amid modest US Dollar (USD) strength, although the decline is not accompanied by any selling or bearish conviction.
The US Dollar Index (DXY), which tracks the dollar against a basket of currencies, is recovering from a more than one-month low amid a flight to safety triggered by US President Donald Trump’s decision to impose duties on imports to Colombia. Trump imposed 25 per cent tariffs on all imports from Colombia after the latter refused to allow two US military planes carrying deported migrants to land in the country. Trump also warned that the tariffs would be increased to 50 per cent next week if there was further non-compliance, fuelling fears of global trade wars and dampening investor appetite for riskier assets.
However, significant US dollar strength seems unlikely amid rising bets that the Federal Reserve (Fed) will cut borrowing costs twice before the end of this year amid signs that US inflationary pressures are easing. Expectations were further heightened following comments by Trump last Thursday, who said he would call for an immediate cut in interest rates. This led to a fresh drop in US Treasury bond yields, which should curb further dollar strength. In addition, uncertainty over the prospects of a rate cut by the Bank of England (BoE) in February is helping to limit GBP/USD losses.
Trading recommendation: Trade mainly with Sell orders from the current price level.
Origin: FreshForex
