GBP/USD struggles at 1.2600 set to first monthly gain since September

• Core PCE rises 2.6% YoY, signaling stalled disinflation but staying near Fed's target.
• Trump confirms 25% tariffs on Mexico and Canada, adding to trade concerns.
• BoE's Ramsden sees inflation risks balanced, no longer tilted to the downside.

The Pound Sterling struggles to clear the 1.2600 figure against the US Dollar yet is set for it first monthly gain since September 2024. The Federal Reserve's (Fed) preferred inflation gauge report was aligned with estimates, hinting that the disinflation process stalled, but it remains near the Fed's goal. The GBP/USD trades at 1.2607, virtually unchanged.

Pound steadies as US inflation data aligns with expectations

The Core Personal Consumption Expenditures (PCE) Price Index in the US rose 0.3% Month over Month from December and increased 2.6% year over year, as estimated, down from December's 2.8% increase. Headline inflation expanded to 2.5% YoY as expected, dipped from 2.6%, and was unchanged every month as projected at 0.3%.

Meanwhile, traders continued to digest US President Donald Trump's tariff rhetoric. He said 25% tariffs on Mexico and Canada would start next week, alongside an additional 10% on China.

Earlier, Cleveland Fed Beth Hammack said that a rate hike is not in her current outlook, that inflation expectations are still anchored, and that it is unclear how far tariffs could affect the economy and, consequently, monetary policy.

Across the pond, Bank of England (BoE) Governor David Ramsen said that the risks of hitting the 2% inflation target in the medium term are two-sided and no longer tilted to the downside.

GBP/USD Price Analysis: Technical outlook

The GBP/USD has recovered some ground, yet it remains tilted to the downside despite consolidating at around the 1.2549 - 1.2700 range. To extend their gains, buyers must clear the 1.2700 mark, followed by the 200-day Simple Moving Average (SMA) at 1.2785. Further gains are seen above 1.2800.

Conversely, if sellers keep the major from closing daily above 1.2600, this could pave the way for a test of the 1.2549 February 5 daily peak. If surpassed, sellers could challenge the 50-day SMA at 1.2457.