March 12, 2025 – Written by Frank Davies

STORY LINK GBP/USD Forecast: Pound Sterling Subdued as US Inflation Cools

The British Pound Sterling (GBP) remained largely static versus the U.S. Dollar (USD) on Wednesday, as fresh US inflation figures failed to generate significant movement in the pairing.

At the time of writing, the Pound US Dollar exchange rate (GBP/USD)was trading at $1.2934, showing minimal change from the morning’s opening levels.

The US Dollar (USD) saw limited movement on Wednesday as fears of an economic slowdown continued to weigh on the currency.

USD remained pressured as concerns over US tariffs and potential retaliatory measures from other nations fuelled recession worries.

With tariffs on steel and aluminium imports coming into force, the European Union announced countermeasures set to take effect from 1 April.

In the afternoon, the latest US consumer price index revealed that inflation eased from 3% to 2.8% in February.

While this reinforced expectations that the Federal Reserve could cut interest rates more aggressively, the report did little to shift market sentiment.

Despite inflationary pressures cooling, fears of an economic downturn kept the ‘Greenback’ subdued. However, safe-haven demand limited any significant losses.

Meanwhile, the Pound (GBP) traded in a narrow range on Wednesday as a lack of UK economic data left the currency without clear direction.

As an increasingly risk-sensitive currency, Sterling faced mixed influences.

Market caution over escalating trade tensions limited GBP gains.

However, a temporary ceasefire agreement between Ukraine and Russia helped to improve overall sentiment, preventing Sterling from sliding lower.

Looking ahead, the GBP/USD exchange rate may experience volatility if the White House announces further tariff measures.

Should Donald Trump escalate trade tensions in response to EU countermeasures, market jitters could weigh on USD.

However, increased safe-haven demand could provide some support for the currency.

On the data front, USD traders will be eyeing the latest producer price index (PPI) release for further clues on inflation trends.

A softer PPI reading could reinforce expectations of Fed rate cuts, potentially weakening the US Dollar.

Meanwhile, UK economic data remains limited until Friday’s GDP release. With expectations of a slowdown in January, Sterling could face headwinds at the end of the week if growth figures disappoint.

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TAGS: Pound Dollar Forecasts