Ella 
GBP/USD attracted some sellers on the first day of the new week and reversed much of Friday’s gains to 1.2750, or a near three-week high. The intraday slide dragged spot prices back below the 1.2700 mark in the past hour, supported by a pickup in demand for the US dollar (USD).
Against the backdrop of continued geopolitical risk appetite, concerns about a second wave of trade wars after US President-elect Donald Trump took office in January drove some safe-haven flows into GBP/USD and weighed on GBP/USD. A certain amount of pressure. In fact, Trump threatened to impose 100% tariffs on the so-called “BRICS” countries – Brazil, Russia, India, China and South Africa – if they replaced the dollar with other currencies in international transactions.
Trump also promised to impose huge tariffs on America’s three largest trading partners – Mexico, Canada and China. That could push up consumer prices and set the stage for the Federal Reserve to stop cutting prices or potentially raise interest rates again. In addition, cautious market sentiment is another factor that helped the safe-haven dollar recover from last week’s losses.
However, the downside for GBP/USD appears to be limited as bets on another rate cut by the Bank of England (BOE) this year diminish. Recently released data showed that underlying price growth in the UK accelerated, with year-on-year growth accelerating sharply to 2.3% in October. This suggests the Bank of England will proceed with caution, which could support Sterling (GBP), providing some support to the pair.
Traders may also avoid making aggressive directional bets ahead of key U.S. macro data releases this week as the new moon begins, starting with the ISM Manufacturing PMI later this Monday. However, market focus will be on the all-important U.S. monthly employment number, commonly known as Friday’s non-farm payrolls report (NFP). This could provide clues about the path of the Fed’s interest rate cuts and influence dollar price dynamics.
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