The GBP/USD pair extends its advance for a fourth straight session, trading near 1.3510 during Wednesday’s Asian session. The Pound Sterling remains supported as the US Dollar stays under pressure following US President Donald Trump’s first State of the Union address of his second term before Congress.
In his speech, Trump claimed his administration had delivered a significant economic turnaround, pointing to easing inflation and a stronger economic backdrop. He also emphasized efforts to combat illegal immigration and restrict fentanyl trafficking across US borders. However, Trump signaled the possibility of raising tariffs on nations that challenge existing trade arrangements, particularly after the Supreme Court blocked several of his broad global tariff measures.
Despite the recent softness in the US Dollar, expectations that the Federal Reserve may maintain current interest rates for an extended period could limit further downside. Boston Fed President Susan Collins stated that keeping rates within the current range remains appropriate for now. Similarly, Richmond Fed President Thomas Barkin said policy settings are well-positioned to address economic uncertainties.
In the UK, economic data painted a weaker picture of the retail sector. The Confederation of British Industry (CBI) reported that its Retail Sales Balance declined sharply to -43 in February from -17 in January, falling short of expectations. Retail activity has been under strain since mid-2023, with February marking a notable drop. Businesses described seasonal trading as disappointing and anticipate continued pressure due to subdued consumer demand.
Meanwhile, Bank of England Governor Andrew Bailey told the Treasury Committee that a potential rate cut in March remains under consideration. He highlighted that services inflation stood at 4.4% in January, above the Bank’s forecast of 4.1%. Chief Economist Huw Pill also urged caution, noting that policymakers should not be overly encouraged by headline inflation moving closer to the 2% target.
