GBP/USD remains steady after registering gains in the previous session, trading around 1.2450 during the Asian hours on Wednesday. However, the pair could face challenges as US President Donald Trump's 25% tariff hike has increased trade war tensions.
Additionally, Fed Chair Jerome Powell's cautious indication regarding the US policy outlook could provide support for the US Dollar (USD) and limit the upside of the GBP/USD pair. Powell said in his semi-annual report to Congress that the Fed officials "do not need to be in a hurry" to cut interest rates due to strength in the job market and solid economic growth. He added that US President Donald Trump's tariff policies could put more upward pressure on prices, making it harder for the central bank to lower rates.
Investors now await the release of the US Consumer Price Index (CPI) inflation data on Wednesday, which could shape expectations for the Fed's monetary policy. Headline CPI inflation is projected to remain steady at 2.9% year-over-year, while core CPI inflation is expected to ease slightly to 3.1% from the previous 3.2%.
The Pound Sterling (GBP) may encounter headwinds after Bank of England (BoE) Monetary Policy Committee (MPC) member Catherine Mann expressed dovish views on interest rate guidance in a Tuesday interview with the Financial Times (FT).
BoE's Mann stated that she had shifted her stance on policy, citing significantly weaker demand conditions. She also expressed confidence that inflation would align with the BoE's 2% target later this year while noting a "non-linear" decline in employment.
GBP/USD could face challenges due to increased trade war tensions following Trump's tariffs.
The US Dollar may appreciate as Fed's Powell signaled there is no urgency to cut interest rates.
The British Pound may struggle as BoE's Mann expressed dovish views on interest rate outlook on Tuesday.(Cay)
source: Fxtreet
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