GBP/USD: Sterling Hits 3-Month High at $1.2690, Gets Slammed by 100-Day Moving Average

British currency has been showing strong bullish signs despite looming tariffs threats, which should in theory help the buck.

💫 Sterling Swinging Up n’ Down

• The GBPUSD pair ricocheted off a three-month high at $1.2690 late on Monday and by Tuesday morning it had quickly changed its trajectory, looking to wrap up the day hugging the flatline. The sterling was last floating near $1.2630 as buyers and sellers were debating where to take it next. The 100-day moving average bucked the trend, helping the bears.
• The UK currency has defied expectations. After Donald Trump said he’s planning to roll out bruising tariffs on all imports into the US, nearly everyone cheered on the US dollar, believing it will outperform every other forex player.

🧐 Are Trump’s Moves Good for USD?

• But that hasn’t been the case. What’s more, some evidence is surfacing that Trump’s tariffs are actually hurting the US dollar. Tariff hikes have the potential to put a dent into global trade, or worse — fuel trade wars where countries turn hostile against each other, hurting global growth and foreign exchange.
• In this light, the British pound bottomed out right before Trump’s inauguration ceremony on January 20. Over that time span to date, the pound-dollar is up 4.4% mostly thanks to a weaker dollar.

👩🏻‍💻 Zoom Out a Little

• And indeed, the greenback has been shoved near the bottom of the rankings among the major currencies. A week into January the American currency began to slip and is now lower by about 3.5% against a basket of rival currencies.
• In the meantime, economic data keeps trickling in and promising to inject some needed volatility into the forex space. Later this week, on Thursday, the US will release its GDP data while Core PCE (the Fed’s favorite inflation measure) comes out Friday.