British Pound Forecast: GBP/USD Teeters Following Another Tariff Tantrum

Trump confirms 25% tariffs on Mexico, Canada, and a fresh 10% on China
GBP/USD struggles as risk-off flows boost the U.S. dollar
Core PCE inflation data in focus amid U.S. growth concerns
Rising wedge signals downside risk, with 1.2550 key support

Summary

Donald Trump says a U.S.-UK trade deal could be reached “very shortly,” though tariff threats remain in play. While talks progress, he confirmed 25% tariffs on Mexican and Canadian imports will take effect on March 4, alongside a fresh 10% levy on Chinese goods. Stocks and bonds slumped, while the USD firmed, leaving GBP/USD testing key support ahead of a risk-laden Friday. Core PCE inflation data looms large, with a 0.3% monthly gain expected.

Seeking a ‘Great’ Trade Deal

Donald Trump says the U.S. and UK are working on a new trade agreement, suggesting a deal could be reached “very shortly” to avoid potential tariffs. Speaking alongside UK Prime Minister Keir Starmer in Washington, Trump said both nations want a “great” deal, with U.S. officials—including Treasury Secretary Scott Bessent and Vice President JD Vance—leading negotiations. Starmer confirmed talks had begun, focusing on advanced technology to strengthen economic ties.

Trump didn’t commit to dropping tariff threats but hinted they "wouldn’t be necessary" if a deal is struck—suggesting he’s using the threat as leverage. The UK is America’s fifth-largest trade partner, with $317 billion in total trade last year.

While negotiations between the U.S. and UK remain ongoing, prospects for a deal with Mexico and Canada appear bleak with Trump confirming via social media that previously flagged 25% tariffs on imports entering the United States will be implemented on March 4. Additionally, Trump announced a further 10% tariff on Chinese imports, doubling an initial increase of 10% made in late January.

Event Risk Rising

Source: TradingView

Traders reacted to the news by selling bonds and stocks, while the U.S. dollar strengthened, leaving GBP/USD teetering heading into a Friday session laden with risk events. Not only will markets have to navigate trade-related headlines, but also the release of the Federal Reserve’s preferred underlying inflation measure, the core PCE deflator. An increase of 0.3% is forecast for January, which would see the annual rate move down to 2.6%—barring any revisions to prior data.

With U.S. growth concerns already elevated thanks to weakening economic data and the threat to consumption posed by higher tariffs, extra emphasis will be placed on consumer spending and income data released within the same report. In the UK, Bank of England Deputy Governor Dave Ramsden is scheduled to speak.

GBP/USD Biased Lower

GBP/USD sits in an established rising wedge, signalling a potential reversal or breakdown may be on the cards, continuing the broader downward trend. Zooming in, Thursday’s bearish move completed a three-candle evening star pattern, another formation often seen around market tops. Momentum is also shifting lower, with RSI (14) breaking its minor uptrend, though MACD is yet to confirm the signal.

Source: TradingView

For now, GBP/USD holds just above 1.2600, a level the pair has done plenty of work around in recent months. Below, 1.2550 and uptrend support located roughly 20 pips lower are levels of note. A break of the latter may facilitate a retest of the 50-day moving average, with 1.2335 after that. Above 1.2600, GBP/USD has struggled on pushes towards and through 1.2700 over the past week, making it a formidable resistance zone given the price and momentum picture.

-- Written by David Scutt

Follow David on Twitter @scutty

How to trade with City Index

You can trade with City Index by following these four easy steps:

Open an account, or log in if you’re already a customer

• Open an account in the UK
• Open an account in Australia
• Open an account in Singapore
Search for the market you want to trade in our award-winning platform
Choose your position and size, and your stop and limit levels
Place the trade

From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.

City Index is a trading name of StoneX Financial Pty Ltd.

The material provided herein is general in nature and does not take into account your objectives, financial situation or needs.

While every care has been taken in preparing this material, we do not provide any representation or warranty (express or implied) with respect to its completeness or accuracy. This is not an invitation or an offer to invest nor is it a recommendation to buy or sell investments.

StoneX recommends you to seek independent financial and legal advice before making any financial investment decision. Trading CFDs and FX on margin carries a higher level of risk, and may not be suitable for all investors. The possibility exists that you could lose more than your initial investment further CFD investors do not own or have any rights to the underlying assets.

It is important you consider our Financial Services Guide and Product Disclosure Statement (PDS) available at www.cityindex.com/en-au/terms-and-policies/, before deciding to acquire or hold our products. As a part of our market risk management, we may take the opposite side of your trade. Our Target Market Determination (TMD) is also available at www.cityindex.com/en-au/terms-and-policies/.

StoneX Financial Pty Ltd, Suite 28.01, 264 George Street, Sydney, NSW 2000 (ACN 141 774 727, AFSL 345646) is the CFD issuer and our products are traded off exchange.