GBP/USD has posted gains for four straight days, hovering around 1.3510 during Asian trading on Wednesday. This rise can be attributed to the US dollar’s relative weakness following President Trump’s first State of the Union speech in his second term, which came before a joint session of Congress.
In his address, Trump highlighted his administration’s economic achievements, citing lower inflation rates and claiming it represented “the longest turnaround in years.” He also mentioned efforts to tackle illegal immigration and the issue of fentanyl at the border. Additionally, he warned that he might impose higher tariffs on nations that “play games” with recent trade agreements after the Supreme Court blocked some extensive global tariffs.
There’s a possibility that the U.S. dollar could regain strength as expectations grow regarding the Federal Reserve’s decision to maintain long-term interest rates. On Tuesday, Boston Fed President Susan Collins stated that keeping interest rates steady for a while seems appropriate. Meanwhile, Richmond Fed President Thomas Barkin mentioned that current monetary policy is “well placed” to address risks to the economic landscape.
Turning to the UK, the Confederation of British Industry (CBI) reported a retail sales balance of -43 for February, significantly lower than January’s figure of -17 and the expected -16. Retail volumes have been struggling since mid-2023, with February showing a notable decline. Retailers characterized the seasonal sales as “poor” and projected ongoing weakness due to low demand.
In a statement to Parliament’s Finance Committee, Bank of England Governor Andrew Bailey noted that inflation in the services sector reached 4.4% in January, surpassing the BoE’s forecast of 4.1%. He indicated that a potential interest rate cut in March remains an “open question.” Chief economist Hugh Pill cautioned against being “misled” by headlines suggesting inflation is nearing the 2% target.
