The US bond yields continue to decline, pushing the US Dollar lower and lifting the GBP/USD pair above 1.2900. Traders are closely watching key US economic data, including weekly jobless claims and the Q4 Gross Domestic Product (GDP) Annualized report. These reports could influence market sentiment and impact currency movements.
The decline in US bond yields has weakened the US Dollar, supporting the Pound Sterling. Currently, the 2-year and 10-year Treasury yields stand at 4.0% and 4.34%, respectively. Lower yields typically reduce demand for the USD, leading investors to shift towards other assets like the British Pound. As a result, GBP/USD has regained its previous session losses, reaching around 1.2910 in the Asian session.
Despite the GBP/USD recovery, trade tensions remain a risk factor. On Wednesday, the US government imposed a 25% tariff on auto imports, set to take effect on April 2. This move has intensified global trade concerns and added uncertainty to the financial markets. Additionally, St. Louis Federal Reserve President Alberto Musalem criticized the tariffs, warning that they could fuel inflation and economic instability.
The Pound Sterling faced downward pressure earlier due to weaker-than-expected UK inflation data. The latest Consumer Price Index (CPI) report showed that headline inflation rose 2.8% year-over-year, missing the 2.9% forecast. Core CPI, which excludes volatile food and energy prices, increased by 3.5%, falling short of the expected 3.6%. These figures have strengthened market expectations that the Bank of England (BoE) may consider easing its monetary policy in the coming months.
Market participants are awaiting the release of the US Q4 GDP Annualized report and Initial Jobless Claims data. These indicators will provide insights into the state of the US economy and could influence Federal Reserve policy expectations. If economic data weakens further, US bond yields may continue to decline, pressuring the USD and supporting GBP/USD gains. However, rising trade tensions could limit upside potential for the pair.
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The decline in US bond yields weakens the USD, pushing GBP/USD above 1.2900. Learn how economic data and trade tensions impact the market.
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