GBP/USD gains ground as risk appetite takes a step up

• GBP/USD rose nearly a full percent on Thursday.
• UK GDP came in firmer than expected, and US PPI figures firmed post-revision.
• US Retail Sales still in the pipe for Friday, but tariff threats have again eased.

GBP/USD rallied on Thursday, climbing over nine-tenths of one percent and tapping the 1.2560 region after economic data came in broadly better-than-expected on both sides of the Atlantic. UK Gross Domestic Product (GDP) beat median market forecasts, and US Producer Price Index (PPI) inflation figures assuaged investor concerns after an uptick in consumer-level inflation this week.

US President Donald Trump: Plan for reciprocal tariffs in the works

US President Donald Trump made a big reveal of his latest idea for drumming up tax revenues in the face of steep administrative tax cuts. "Reciprocal tariffs", plans to levy fees against countries who have tariffs on US goods, are set to take shape over the coming months, with US Commerce Secretary Howard Lutnick tapped to work out the details.

The timeline on further tariff threats remains elusive, and investors are pricing the fresh tariff threats in as something that is not going to happen, much like President Trump's "day one tariffs", and tariffs on Canada and Mexico, and specific tariffs on automobiles, microchips, and pharmaceuticals. Taken in totality, there are a lot of concepts of a plan to impose stiff import taxes on US consumers and businesses, but very little real progress, and investors are betting that the trend will continue.

Forex Today: Markets now look at tariffs and US fundamentals

UK Q4 GDP clocked in at 1.4% YoY, well above the forecast 1.1%, and rising even further from the previous period's revised 1.0%. QoQ GDP also beat the street, rising to 0.1% versus the forecast -0.1% contraction.

On the US side, PPI business-level inflation came in above expectations, but sharp revisions to previous figures gave investors the opportunity to interpret the latest batch of price data as showing easing inflation pressures. Core PPI inflation for the year ended in January came in at 3.6% YoY, well above the forecast 3.3% but a tick below the revised figure of 3.7%, which initially printed at 3.5%.

US Retail Sales are all that remains in the barrel for the remainder of the week's key data. Markets will be hoping for another firm print, with the monthly Retail Sales figure forecast to come in at a slight contraction of -0.1% compared to the previous 0.4%.

GBP/USD price forecast

After weeks of bullish effort, GBP/USD is finally back above the 50-day Exponential Moving Average (EMA) near the 1.2500 handle. There is still plenty of room to the downside that bulls can fall after several weeks of congestion, but the next immediate technical barrier to the upside sits at the 200-day EMA parked just below 1.2700.

GBP/USD daily chart