GBP/USD recovered its latest losses from the previous session, rising to around 1.2910 during the Asian session on Thursday (3/27). The pair strengthened as the US Dollar (USD) remained pressured by declining Treasury yields, with the 2-year and 10-year yields hovering around 4.0% and 4.34%, respectively. Market participants are closely watching the upcoming US economic data, including the weekly Initial Jobless Claims and the final Q4 Annual GDP report, due later in the day.

However, the GBP/USD pair's gains could be capped as risk-averse sentiment increases amid escalating US trade policy. Late on Wednesday, US President Donald Trump signed an order imposing a 25% tariff on auto imports, which will come into effect on April 2, with billing starting the following day. However, a one-month reprieve will be granted for auto parts imports. The move has escalated global trade tensions, adding to market uncertainty

Adding to trade war concerns, St. Louis Fed President Alberto Musalem issued a strongly worded statement on Wednesday, joining other Federal Reserve policymakers in criticizing the tariff policy. Musalem warned that the moves were unsettling the U.S. economy, increasing uncertainty and pushing inflation higher.

Meanwhile, the pound sterling (GBP) weakened after the release of the UK Consumer Price Index (CPI) report for February, which showed inflation cooled faster than expected. The lower CPI figure has fueled speculation that the Bank of England (BoE) may be leaning toward monetary easing.

The headline CPI rose 2.8% year-on-year, missing the 2.9% forecast and cooling from 3.0% in January. The core CPI, which excludes volatile items, rose 3.5%, below expectations of 3.6% and the previous reading of 3.7%. On a monthly basis, headline CPI grew 0.4% after a 0.1% decline in January, below the 0.5% estimate. However, services inflation—which is closely watched by BoE officials—held steady at 5%. (Newsmaker23)

Source: FXstreet