The British pound (GBP) bounced back from an intraday low of 1.2380 against the US dollar (USD) in the European session on Tuesday (February 4). The GBP/USD pair bounced back as the US dollar struggled to gain a firm footing, following US President Donald Trump's decision to suspend the imposition of 25% tariffs on Canada and Mexico for 30 days.

President Trump agreed to the 30-day suspension in exchange for concessions on border enforcement and crime with the two neighboring countries, Reuters reported. The announcement triggered a sharp sell-off in the US dollar (USD). The US Dollar Index (DXY), which tracks the greenback against six major currencies, traded cautiously near 108.50.

The US's suspension of the tariff order on North American countries has brought major relief to assets considered risky across the globe. However, Trump still went ahead with his decision to impose 10% tariffs on China and also threatened to do more than that. Such a scenario would curb investors' risk appetite. In response, China has also imposed tariffs on US imports. The Chinese Finance Ministry said it would impose tariffs of 15% on coal and Liquefied Natural Gas (LNG) and 10% on crude oil, farm equipment and some cars, Reuters reported.

Looking ahead, the next trigger for the US dollar will be the US Nonfarm Payrolls (NFP) data for January, due for release on Friday. The official employment data is expected to significantly influence market expectations on how long the Federal Reserve (Fed) will remain on hold on interest rates. Fed Chair Jerome Powell stated last week that only "a real upturn in inflation or at least some weakness in the labor market" could force us to make some adjustments in the stance of monetary policy.

On Tuesday, investors will focus on the JOLTS Job Openings data for December, due for release at 15:00 GMT. Economists estimate that employers posted 8 million new job offers, slightly lower than the nearly 8.10 million in November.(Newsmaker)

Source: FXstreet