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GBP/USD Forex Signal: At Risk Amid Tariffs and BoE Interest Rate Decision

By Crispus Nyaga
Crispus Nyaga is a financial analyst, coach, and trader with more than 8 years in the industry. He has worked for leading companies like ATFX, easyMarkets, and OctaFx. Further, he has published widely in platforms like SeekingAlpha, Investing Cube, Capital.com, and Invezz. In his free time, he likes watching golf and spending time with his wife and child.

Bearish view

  • Sell the GBP/USD pair and set a take-profit at 1.2200.
  • Add a stop-loss at 1.2450.
  • Timeline: 1-2 days.

Bullish view

  • Buy the GBP/USD pair and set a take-profit at 1.2450.
  • Add a stop-loss at 1.2200.

GBP/USD Forex Signal Today 03/02: Drops Amid Tariffs (graph)

The GBP/USD pair retreated on Monday morning as the market reacted to the new trade war between the US and its top trading partners. It also dropped to a low of 1.2390, down from last week’s high of 1.2526.

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Bank of England decision and tariffs ahead

The GBP/USD pair retreated after the Federal Reserve delivered its first interest rate decision of the year last week. It left interest rates unchanged as officials guided in the previous monetary policy meeting.

The bank also hinted that it will be more cautious when cutting interest rates as inflation fears remain. These fears remained after the US released strong inflation numbers that showed that inflation remained above the 2% target.

Inflation will likely remain elevated in the next few months after the Donald Trump administration announced big tariffs on goods from its biggest trading partners like Canada, Mexico, and China, triggering a new trade war.

Trump hopes that these tariffs will help to reduce the US trade deficit with its top trading partners. Economists believe that the view that tariffs will help to reduce the deficit is flawed since the US has some of the highest labor costs. As such, these costs will be transferred to customers, boosting inflation.

The next important catalyst for the GBP/USD pair will be the upcoming Bank of England (BoE) interest rates decision. Unlike the Fed, analysts expect the bank to cut interest rates by either 0.25% or 0.50%.

Recent economic numbers showed that the headline and core consumer price index dropped slightly in December. More data revealed that the British economy has stagnated. A Halifax report released on Friday showed that the house price index (HPI) dropped from 4.7% in December to 4.1% in January.

The GBP/USD pair will also react to the upcoming US nonfarm payrolls (NFP) data, which are scheduled for Friday. The NFP report will provide more color about the country's labor market.

GBP/USD technical analysis

The GBP/USD pair retreated slightly to a low of 1.2390 after the US PCE inflation data released on Friday. It moved below the descending trendline that connects the highest swings since November 6 last year.

The pair has remained below the 50-day moving average, a sign that bears are still in control. It has also dropped below the strong pivot reverse point of the Murrey Math Lines tool.

The Relative Strength Index (RSI) has turned downwards. Therefore, the pair will likely continue falling as sellers target the ultimate support level at 1.2200. This view will become invalid if the pair rises above the resistance level at 1.2450.

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Crispus Nyaga
Crispus Nyaga is a financial analyst, coach, and trader with more than 8 years in the industry. He has worked for leading companies like ATFX, easyMarkets, and OctaFx. Further, he has published widely in platforms like SeekingAlpha, Investing Cube, Capital.com, and Invezz. In his free time, he likes watching golf and spending time with his wife and child.

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