Pound Sterling dives against USD when US President Trump begins a global trade war

The Sterling pound will fall below 1.2300 compared to the American dollar, because market moods change the risk after US President Trump puts tariffs to Canada, Mexico and China.
Investors are waiting for economic data related to US employment and Boe political decision this week.
It is expected that Boe will reduce interest rates by 25 BPS to 4.5%.

The Sterling (GBP) pound trads much lower to almost 1.2250 in relation to the US dollar (USD) in Monday’s European session. Earlier on the same day, the GBP/USD pair had the opening of the gap as the imposition of tariffs to Canada, Mexico and China by the President of the United States (USA) Donald Trump terrified global financial markets, forcing investors to move to the secure haven of the fleet.

The established market moods led to a rapid growth of the American dollar (USD), which works strongly in a turbulent environment. The American dollar index (DXY), which follows the Greenback value compared to the six main currencies, rallies above 109.50, the highest level observed for over two weeks.

President Trump hit 25% tariffs on Canada and Mexico and 10% on China over the weekend. Trump has already threatened to raise tariffs on his partners from North America to allow illegal immigrants and to enter the country.

On the economic front, investors will pay special attention to economic indicators related to the labor market this week, which will affect market speculation on how long the federal reserve (FED) will keep interest rates at their current level. After the political meeting on Wednesday, in which the Fed left interest rates unchanged in the range 4.25%-4.50%, chairman Jerome Powell said that the corrections of monetary policy will become appropriate only when they see “real progress in inflation or some Weakness in the labor market. “

In Monday session, investors will focus at the American Institute Management Management Management Managing Managers’ Index (PMI) and changed data S&P Global Manufacturing PMI in January. It is estimated that ISM PMI has improved to 49.5, still below the 50.0 threshold, which separates the expansion from contraction, from 49.3 in December, which suggests that factory activities have been contracted, but at a slower pace.

Daily Digest Market Movers: Pound Sterling will be influenced by the political decision Boe

The Sterling pound shows mixed results against the main peers on Monday, when investors focus on the decision of the monetary policy of the Bank of England (Boe), which will be announced on Thursday.
Troads are convinced that Boe will reduce interest rates by 25 base points (BPS) to 4.50%. Seven members are to vote for a reduction in interest rates by 25 BPS, from the nine -member Monetary Policy Committee (MPC), and two are expected that interest rates will not change. A decision -maker Boe Catherine Mann, who was an open Jastrzębie, is expected, will be one of two members.
Market participants are sure that Boe reduces interest rates due to the slowdown in Great Britain (Great Britain) inflation pressure and the growing risk of supple demand for work. The consumer price indicator in Great Britain (CPI) – which excludes unstable position prices, such as energy and food – slowed down to 3.2% in December. Labor market data in three months ending November showed that the economy added 35,000 recent employees, because the company owners slowed down the employment process due to the dissatisfaction with the chancellor of the Rachs Reevers treasury about raising employers’ contribution to national insurance (Ni).

Technical analysis: pound sterling will fall below 1.2300

The Sterling pound drops back to almost 1.2250 after unsuccessful recovery above the 50-day interpretation of the movable medium (EMA), which trads around 1.2500, last week. In the near future the perspective of the cable became bear when it moves below 20-day EMA, which floats around 1.2388.

The 14-day relative strength indicator (RSI) drops to almost 40.00. Should the couple face the bear if RSI dives below this level

Looking down, the lowest level of January 13 1,2100 and the lowest level of 2023. 1,2050 will act as key support zones for the couple. On the other hand, the highest level of December 30 of 1.2607 will act as a key resistance.