February 3, 2025 – Written by David Woodsmith

STORY LINK GBP/USD Alert: Pound Rallies vs Dollar as Mexico Secures 1-Montb Tariff Delay

BREAKING: The Pound to Dollar exchange rate (GBP) jumped to 1.2420 from around 1.2330 at the US open. Risk appetite recovered strongly after Monday’s opening following reports that President Trump’s 25% tariffs on Mexico had been delayed by 1 month.

The dollar also pared gains against European currencies amid hopes that bilateral negotiations could lead to further concessions.

The Pound to Euro (GBP/EUR) exchange rate held firm around 1.2030.

The move followed a conference call between Trump and Mexican President Sheinbaum.

Volatility will inevitably remain high with risk vulnerable again if Canada adopts a hardline stance and fails to secure a reprieve.

According to sources, Mexico wanted the tariffs dropped entirely, but Trump would only agree on a 1-month postponement.

Inevitably, the US Administration will look to force more concessions from Mexico.

The immediate relief sparked hopes for a delay to tariffs on Canada and helped trigger a rebound in risk appetite, with equities paring losses.

The Canadian dollar rebounded strongly with USD/CAD at 1.4575 from 21-year highs near 1.4800.

Scotiabank commented, “The weekend advance has left a gap on the intraday chart between 1.4550/00, which markets may have to try and fill before the USD’s broader advance resumes.”

The Euro also rallied, although the threat of tariffs will loom large as a negotiating tactic.

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Created on February 03, 2025

• Recent gains by the Japanese yen have led to the week and month ending with gains, amid growing expectations that the Bank of Japan will continue to raise interest rates this year.
• The selling operations of the USD/JPY pair pushed it towards the support level of 153.80 before closing the week’s trading stable around the level of 155.18, as the US dollar gained positive momentum in the forex markets at the end of trading amid Trump’s official approval of customs tariffs on goods imported from China, Canada and Mexico.

Japanese Yen Performance Anticipates BoJ Policies

According to the forex market trading, the Japanese yen was in a good position against the rest of the other major currencies amid strong signals of the future tightening of the Japanese central bank’s policies. In this regard, Deputy Governor of the Bank of Japan Ryozo Himino stated that the Japanese central bank plans to continue raising rates if the economy and inflation are in line with expectations. On the economic front, data released at the end of the week showed that core inflation in Tokyo accelerated to an 11-month high of 2.5% in January, reinforcing expectations for hawkish policy from the Bank of Japan.

In addition, Japanese retail sales exceeded expectations, industrial production rebounded, and the country’s unemployment rate fell unexpectedly.

Trading Tips:

Keep in mind that currency investors are waiting for new buying opportunities for the dollar against the Japanese yen, so be a good follower of the events of this important week

And this week, investors will closely analyse the summary of opinions from the last Bank of Japan meeting for insights into potential policy tightening this year.

US Dollar Will Be Affected by Trump’s Conflict with Powell

After the US central bank kept interest rates unchanged. Amid expectations of a future dispute between Trump and Jerome Powell. In a decisive post on the Truth Social website, Trump attacked the Federal Reserve after the meeting. “Because Jay Powell and the Fed have failed to stop the problem they created with inflation, I will do so by unleashing American energy production, cutting regulation, rebalancing international trade, and re-igniting American manufacturing,” Trump wrote.

Meanwhile, it’s worth noting that Trump is not necessarily calling for lower interest rates and is proposing his own solutions independently of the Fed. This is a different approach from his first term and may be related to the recognition that inflation remains a risk. Other criticisms have been directed at the Fed. Trump continued by saying that “if the Fed had spent less time on diversity, equity, inclusion, gender ideology, ‘green’ energy, and fake climate change, inflation would never have been a problem.”

Overall, Trump has probably had more influence on these issues than on actual policy. While Powell claimed he had “not been in touch” with Trump, some reporters at the press conference asked him about some of the recent changes. As the BBC noted, “…the questions Powell faced about how the Fed would handle a new White House order to scrap its diversification programs – and why it had pulled out of a global group of central banks focused on the risks of climate change to the financial system – underscored the challenges he will face in keeping the bank above the political fray.”

USD/JPY Technical Analysis and Expectations Today:

According to the performance on the daily chart, as is clear the USD/JPY pair is in an uptrend breakout mode. Therefore, forex investors may be looking for new opportunities to buy the USD/JPY. Technically, we see that the most appropriate levels for buying the USD/JPY currently are around the support levels of 153.30 and 151.90 respectively. Furthermore, as we always recommend not taking risks, no matter how strong the trading opportunities are. On the other hand, and over the same period of time, the resistance of 156.70 will remain the most important for bulls to control, and thus prepare for the psychological resistance of 160.00 again.

Want to trade our USD/JPY forex analysis and predictions? Here’s a list of forex brokers in Japan to check out.

Created on February 03, 2025

• As you can see, the British pound has been rather bullish against the Japanese yen during the trading session on Friday as we headed into the weekend on a positive note.
• At this point in time, I suspect you have a scenario where a lot of traders are trying swap at the end of the day.
• The 200-day EMA sits just above and is offering significant resistance, and I think that is something worth paying close attention to.

Ultimately, at this point in time, you have to be very cognizant of the fact that we have recently tested a major support level, and it now looks very much like a market that is trying to determine whether or not we can continue to climb. I think that’s probably the case given enough time, but I also recognize that there is a lot of technical resistance just above. Not only at the 200 day EMA, but also the 50 day EMA and then the 195 yen level. In general, I like this pair. I just don’t necessarily want to get overly exposed at this point.

Risk Appetite

This is very sensitive to risk appetite, and therefore I think you have to be very cautious because as we’ve seen on Friday, Donald Trump is willing to play games in the media, and that has the computers trading back and forth in a wild fashion. So, with all of that being said, I think you’ve got a scenario where a lot of traders are going to be looking at this basically as the carry trade and hoping for a lot of sideways action. The 190 yen level underneath is the bottom, and the 200 yen level above is the top. Right now, we’re closer to the bottom, so I’m more inclined to be a buyer, but again, not in huge, massive positions.

Begin trading our daily forecasts and analysis. Here is a list of Forex brokers in Japan to work with.

• GBP/USD starts the week under strong selling pressure on Trump tariff news.
• The US Dollar benefits from the risk-averse market atmosphere. 
• The pair turns technically bearish despite the latest recovery attempt.

GBP/USD declined sharply at the weekly opening and touched its lowest level in two weeks near 1.2250. Although the pair corrects higher and trades above 1.2300 in the European session, it could have a difficult time gathering recovery momentum, with safe-haven flows dominating the action in financial markets.

Over the weekend, US President Donald Trump delivered on his tariff threats, announcing that they will impose sweeping 25% tariffs on Mexican and Canadian imports and 10% on Chinese goods entering the US. Additionally, Trump told reporters that he would “definitely” impose tariffs on European imports but didn’t provide any additional details.

Reflecting the negative impact of this development on risk mood, the UK’s FTSE 100 Index is down more than 1%. Furthermore, US stock index futures were last seen losing between 1.3% and 1.9%.

In the second half of the day, the ISM Manufacturing PMI data for January will be featured in the US economic calendar. Unless there is a significant divergence between the market expectation and the data, investors are likely to remain focused on risk perception. A bearish opening in Wall Street, followed by an extended selloff in major equity indexes could boost the USD and force GBP/USD to continue to push lower.

GBP/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the 4-hour chart stays below 40, suggesting that the bearish bias stays intact. The pair was last seen trading near 1.2310, where the 100-period Simple Moving Average (SMA) and the ascending trend line align. In case GBP/USD fails to clear this hurdle, technical sellers could retain control. In this scenario, 1.2260-1.2250 (Fibonacci 23.6% retracement of the latest downtrend, daily low) could be seen as next support before 1.2160 (static level) and 1.2100 (static level, end-point of the downtrend).

On the upside, 1.2370 (Fibonacci 38.2% retracement), 1.2400 (200-period SMA) and 1.2450 (Fibonacci 50% retracement) could be seen as next resistance levels.