Pound US Dollar Exchange Rate News: GBP/USD Fluctuates as US Inflation Cools

The Pound US Dollar (GBP/USD) exchange rate remained volatile on Wednesday, as the latest US inflation data failed to provide clear direction for the currency pair.

US Dollar (USD) Pressured by Recession Fears Amid Inflation Slowdown

The US Dollar (USD) struggled on Wednesday, hovering near multi-month lows due to persistent concerns over a potential US recession. Market sentiment remained cautious, with traders worried that economic pressures could push the American economy into contraction.

As of writing, GBP/USD was trading at $1.2934, showing little change on the day.

Adding to economic uncertainty, newly imposed US tariffs on all steel and aluminium imports took effect. In response, the European Union (EU) announced retaliatory measures set to begin on April 1. Market analysts fear that these tariffs, combined with countermeasures from global economies, could exacerbate economic downturn risks in the United States, further weighing on the ‘Greenback’.

Despite a cooling of inflation, the latest US consumer price index (CPI) failed to significantly impact USD. February’s CPI report showed inflation easing from 3% to 2.8%, reinforcing expectations that the Federal Reserve may implement interest rate cuts sooner than previously forecast. While this helped ease recession concerns, it did little to provide support for the US Dollar.

Pound (GBP) Remains Rangebound Amid Market Uncertainty

Meanwhile, the British Pound (GBP) remained largely rangebound on Wednesday due to a lack of key UK economic data. As a risk-sensitive currency, Sterling also faced muted movements amid cautious market sentiment.

Ongoing trade tensions added further uncertainty, as the UK government stated it ‘reserves the right to retaliate’ against US tariffs but aims to proceed ‘pragmatically’ and ‘cool-headedly’.

However, geopolitical optimism provided some relief to markets. Following US-Ukraine discussions, Kyiv agreed to a 30-day ceasefire, fueling hopes that diplomatic efforts could eventually bring an end to Russia’s three-year-long invasion of Ukraine. This news helped to temper the overall risk-off sentiment, offering some support to GBP/USD.

Looking Ahead: Key Data Releases and Potential Market Drivers

Moving forward, further US tariff announcements could trigger volatility in the GBP/USD exchange rate. If former President Donald Trump announces additional trade restrictions in retaliation to international countermeasures, the US Dollar could experience heightened turbulence.

Additionally, escalating recession fears may put further pressure on the ‘Greenback’, although safe-haven demand could limit losses.

On the data front, USD traders will closely monitor the upcoming producer price index (PPI) report for fresh insights. Any indication of cooling factory-gate inflation could increase expectations for Federal Reserve interest rate cuts, potentially weakening USD further.

For the UK, economic data remains sparse until Friday when the latest Gross Domestic Product (GDP) figures are released. If the British economy shows signs of slowing in January, Sterling could face additional downside pressure by the end of the week.