GBP/USD remained anchored near 1.26 in early NorAm trade, recovering from an overnight dip to 1.2575 after mixed inflation and personal income and consumption data and with Trump tariff talk in focus today's close may set the tone for sterling in the near-term. Today's widely anticipated U.S. core PCE price index data was overshadowed by a selective risk selloff, with the dollar holding steady near recent highs while commodities were hit amid the heightened tariff concerns. Though the UK is not the primary target of Trump trade levies -- unlike Canada, Mexico, China and the euro zone-- the fallout from the on-again-off-again tariff kerfuffle, while having less severe effects on currencies remains a potentially significant headwind which may stall an otherwise buoyant outlook for GBP/USD. For sterling traders, the risk is that markets begin to foresee austere tariffs reducing trade generally in a way that spills over to Britain's economy, derailing recovery at a time of persistently high inflation, eventually rekindling UK fiscal concerns, which could ultimately spill over onto the pound. For now, support near 1.26 is holding, offering some relief for sterling longs. However, a close below 1.2550, the daily low on Feb. 14, could shift sentiment, bringing 1.2483, the 50% Fib of 1.2249-1.2717, into focus, below which bears will gain the advantage for a more protracted slide to Feb. 11 lows by 1.2333.
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(Paul Spirgel is a Reuters market analyst. The views expressed are his own)