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GBPUSD:
The GBP/USD pair is gaining strength and approaching 1.2965 during Asian trading on Monday. Concerns that US President Donald Trump’s tariffs will lead to increased inflation and a slowdown in economic growth are exerting downward pressure on the US Dollar (USD) and providing a supportive environment for the major pair.
Last week, Trump announced 25 per cent tariffs on imported cars and light trucks, which will take effect on April 3. This follows an earlier 25 per cent tariff on steel and aluminium, and comes ahead of Trump’s expected announcement of further tariffs on Wednesday. Analysts are concerned that these measures will have a negative impact on the US economy, potentially limiting the Federal Reserve’s (Fed) ability to reduce interest rates while also contributing to an increase in inflation in the near term. This, in turn, could lead to a weaker US Dollar and a rise in GBP/USD in the near term.
‘Recession risks have risen to up to 40 per cent – due to fears that aggressive US policy will hit business and household sentiment,’ warned Bruce Kasman, chief economist at JPMorgan.
Data from the UK showed that retail sales were unexpectedly strong in February, providing support for the Pound Sterling (GBP). UK retail sales rose by 1.0% month-on-month in February, up from 1.4% previously (revised from 1.7%), as reported by the Office for National Statistics on Friday. This figure was stronger than the forecast for a 0.3 per cent decline. Ruth Gregory, an economist at the consultancy Capital Economics, commented on the positive developments, stating that the improved performance in retail sales during the first quarter suggests a potential turnaround in the economy.
Trading recommendation: BUY 1.2970, SL 1.2900, TP 1.3030
Origin: FreshForex
