– Written by
Frank Davies
STORY LINK GBP/USD Forecast: Pound Sterling Rises on Trump TACO Trade
The Pound to US Dollar exchange rate (GBP/USD) traded choppily on Thursday but retained an upward bias overall as improving risk appetite outweighed mixed UK and US data.
At the time of writing, GBP/USD was trading around $1.3472, up more than 0.3% on the day.
The Pound (GBP) initially struggled to find direction, with stronger-than-expected UK data doing little to shield Sterling from broader market volatility.
Figures released earlier in the session showed UK public sector borrowing undershot expectations in December, supported by firmer tax receipts. This was followed by a sharp improvement in the Confederation of British Industry’s distributive trades survey, which rose to -17 in January from December’s -44, beating forecasts of -35.
Despite these constructive signals, Sterling failed to attract immediate follow-through. Instead, GBP traded in a narrow range as markets reacted to renewed volatility surrounding President Donald Trump’s abrupt shift in rhetoric on Greenland.
As the session progressed, however, sentiment improved. A more risk-positive backdrop emerged, lending support to the increasingly risk-sensitive Pound and allowing GBP/USD to grind higher into the latter part of the day.
Meanwhile, the US Dollar (USD) edged lower as demand for safe-haven assets ebbed.
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After days of heightened tension between the US and Europe, President Trump appeared to soften his stance on Greenland during remarks at the World Economic Forum in Davos. He ruled out the use of force, spoke of a “framework of a future deal” agreed with NATO Secretary General Mark Rutte, and abandoned plans to impose tariffs on eight European nations backing Greenland, including the UK.
The easing in geopolitical tensions encouraged risk appetite and weighed on the Dollar. Later data offered little relief. The core PCE price index, the Federal Reserve’s preferred inflation gauge, showed price pressures remained sticky in November but failed to generate meaningful support for USD.
Pound-to-Dollar Forecast: Retail Sales and PMIs in Focus
Looking ahead, the Pound could come under early pressure on Friday following the release of the UK’s December retail sales figures. A forecast 0.1% decline would mark a third consecutive monthly contraction and may undermine Sterling sentiment.
Attention will then turn to January’s preliminary UK services PMI. A modest improvement is expected, with the index forecast to edge up from 51.4 to 51.7. Such a limited change may struggle to drive GBP unless the data delivers a clear surprise.
Across the Atlantic, US PMI releases later in the session may influence USD sentiment. Forecast improvements in both manufacturing and services activity could offer the Dollar some late-session support.
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TAGS: Pound Dollar Forecasts
