The Pound Sterling (GBP) recovers its entire intraday losses and climbs above 1.2500 against the US Dollar (USD) in Monday’s North American session.
The GBP/USD pair bounces back as the US Dollar retreats after investors digest fears of United States (US) President Donald Trump imposing 25% tariffs on Colombia overnight.
Over the weekend, President Trump threatened to impose tariffs on its South American trading partner for not allowing military flights carrying illegal immigrants in their territory. Later, Trump put proposed tariffs on hold after Colombia accepted his terms.
The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, falls back to near 107.50 from an intraday high of 107.80. The Greenback lost its risk premium as market participants expected President Trump would use tariffs only to negotiate deals.
“This seems to feed into the growing sense that Trump is underdelivering on protectionism compared to pre-inauguration remarks, and that ultimately some of those tariff threats may not materialize as long as some concessions are made on trade,” said ING.
Going forward, this week’s primary trigger for the US Dollar will be the Federal Reserve’s (Fed) monetary policy decision, which will be announced on Wednesday.
The Fed is almost certain to keep interest rates unchanged in the range of 4.25%-4.50%. Investors will pay close attention to Fed Chair Jerome Powell’s press conference after the interest rate decision, who is expected to face the question of whether the Fed will positively react to Trump’s call for immediate rate cuts.
