Sterling slips on trade war fears, central bank uncertainty

The pound sterling dropped 0.29% against the US dollar on Friday, set to end the week unchanged after major central banks featured dovish monetary policy decisions led by the Federal Reserve and the Bank of England.

The GBPUSD currency pair traded at 1.2931 after hitting a daily peak of 1.2969.

Market mood remains downbeat, as depicted by US equities posting losses, while the greenback remains bid.

On Thursday, the BoE kept rates unchanged and said there is uncertainty about the future, echoing Fed Chair Jerome Powell’s words. Both policymakers mentioned President Donald Trump’s tariffs against its partners as a cause.

Kenneth Broux, the head of corporate research at Societe Generale, said, “there’s a general sense of caution. We don’t really know what are the implications of the trade war on growth and inflation.”

Traders had circled April 2 as a crucial date for the enactment of US reciprocal tariffs. Most analysts estimate that the trade war might spur a slowdown in the global economy.

The lack of economic data releases and the beginning of the Fed parade leaves traders leaning on policymakers. New York Fed’s John Williams said the Fed’s 2% target is not up for debate, adding that the current modestly restrictive monetary policy is “entirely appropriate,” and it is hard to know how the economy will perform.

Chicago Fed’s Austan Goolsbee said that when there is a lot of uncertainty, you have to wait for things to clear up.

Next week, the UK economic docket will feature the consumer price index (CPI) and the Spring Budget statement. Across the pond, the Fed’s preferred inflation gauge, the core personal consumption expenditures (PCE) price index, will also be eyed.