Sterling Whipsaw After Mann’s Comments and Escalating Trade Tensions | Errante
Market Overview
The British Pound weakened against most of counterparts during early London session on Tuesday after BoE’s Mann left dovish remarks. Mann justified her support for a 50-bps rate cut in an interview with Financial Times. However, later comments gave some life to the buyers. Market participants are also worried because of Trump’s recent tariff plan.
Fundamental Analysis
Mann known for hawkish stance previously, mentioned the weaker demand conditions and confidence in reaching the inflation target of 2% this year. She also noted a non-linear decline in employment which could be a concern for the economy. However, later she reiterated that long term policy rates should stay around 3% to 3.5%. This stance stalled the sellers and helped bulls a bit to recover lost ground.
Meanwhile, the GBP/USD pair slipped below the 1.2350 level as greenback firmed up amid tariff jitters. President Trump imposed a sweeping 25% tariff on aluminum and steel imports, removing quota and exemptions from all countries. The decision will be effective from March 4 with an aim to boost local industries. However, trade war fears have sparked, as a result.
Market participants are anxious that new tariffs will raise the input costs for American businesses, resulting in increased inflationary pressure. Hence, Fed could keep its restrictive policies for longer. Investors are now eying BoE Governor Bailey’s speech followed by Fed’s Powell’s commentary. Moreover, the US CPI data due on Wednesday remains the major event of the week.
Technical Analysis
The GBP/USD 4-hour chart shows a downtrend with several small bearish candles below 30-period SMA. It shows a selling pressure on the pair that could lead the price towards 1.2300 area ahead of 1.2250. The RSI is also in the bearish territory around 30.0. The value may hit the oversold region as well. Hence, a corrective upside could be seen from 1.2300 for now. Breaking below the level may exacerbate selling pressure.
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