The Pound Sterling rose during the North American session after briefly hitting a two-day low of 1.2605. The movement was driven by a weakening US Dollar, influenced by falling Treasury yields which saw the 10-year note drop 10 basis points to 4.30%.

Concerns around trade emerged as the US President reiterated tariffs on Canada and Mexico. Additionally, UK retailers indicated plans to reduce investment due to declining consumer spending. A poll showed that 65 economists expect the Bank of England to maintain rates at 4.50% in March.

In the technical outlook, GBP/USD remains neutral to upward as it trades above the 100-day Simple Moving Average at 1.2648, with a potential rise towards 1.2700. Conversely, a drop below 1.2600 might lead toward support at 1.2549.

With the Pound strengthening against the weaker Dollar, traders should take note of the shifting bond market. The retreat in US Treasury yields reflects changing investor sentiment, making the Dollar less appealing. The 10-year yield sliding from earlier levels suggests that money is moving out of bonds, which could mean more volatility ahead. Those trading derivatives should be mindful of this, as lower yields often coincide with a less aggressive stance from the Federal Reserve.

Trade policy is another area demanding attention. The US President’s renewed stance on tariffs concerning Canada and Mexico brings uncertainty to markets, particularly those sensitive to trade flow disruptions. The broader implications could extend beyond immediate currency fluctuations, affecting supply chains and growth forecasts. Meanwhile, UK businesses have signalled hesitation, trimming investment plans as purchasing power weakens. A slowdown in consumer activity could place more pressure on policymakers, influencing rate discussions in the months ahead.

As for monetary policy, analysts widely expect interest rates in the UK to stay at 4.50% when the Bank of England meets in March. Given the central bank’s dual focus on inflation control and economic stability, any shift in this view could have a direct effect on the Pound. If inflation proves more persistent than expected, this could prompt rates to remain higher for longer, potentially supporting Sterling.

Technically, GBP/USD looks supported by the 100-day Simple Moving Average around 1.2648, keeping an upward bias intact. Should momentum continue, a move toward 1.2700 is possible. However, the pair remains sensitive to shifts in sentiment, and a drop below 1.2600 would expose further downside towards 1.2549. Traders positioning for movements in either direction should be cautious of changing risk appetite in global markets.