GBP/USD rallies on a moment of Greenback weakness, but tensions remains high

• GBP/USD rose nearly a full percent on Monday.
• US President Donald Trump continues to explore tariff threats, but lacks action.
• ANother NFP Friday looms ahead as markets hope for more tariff walkbacks.

GBP/USD rose on Monday, buoyed by a broadly-underbid US Dollar and a latent recovery in Pound Sterling flows. The pair is knocking back into the 1.2700 handle, with price action continuing to get mired in the 200-day Exponential Moving Average (EMA).

US President Donald Trump reiterated his threats to impose a 25% tariff package on Canada and Mexico on Monday, which are set to automatically go into effect at midnight EST Tuesday morning. Markets have gotten used to President Trump kicking the can on his own policy threats since taking office in January, but this time may turn out to be different and general market sentiment is wobbling.

Data remains limited this week on the UK side of the economic data docket, leaving markets to toil under the burden of tariff threats, as well as a looming Friday Nonfarm Payrolls (NFP) print due at the end of the week.

Trader confidence in the US economy has grown shaky quite quickly, and investors will be watching this week's NFP jobs print with a keen eye. However, a smattering of Federal Reserve (Fed) policymakers will be making public appearances throughout the week, and US ISM Services Purchasing Managers Index (PMI) Services figures are due on Wednesday. According to a sampling of key business operators, business activity expectations for March shrank slightly, with the ISM Manufacturing PMI falling to 50.3. The economic indicator is still holding above the key 50.0 level that typically separates contraction versus expansion expectations, but the one-month fall from February's 50.9 accelerated through median market forecasts of a slight trim to 50.5.

GBP/USD price forecast

GBP/USD is trading back into the 200-day EMA once again, testing chart paper near the 1.2700 handle. Cable has skidded sideways recently, with price action getting squeezed between the 200-day EMA and the 50-day EMA near 1.2540.

Bullish momentum has been a steady force since GBP/USD bottomed out at 1.2100 in January, but topside momentum looks about over. Cable traders remain unwilling to sell off enough to kick off a fresh leg lower, but a fresh push into bull country looks unlikely with technical oscillators stuck in overbought territory.

GBP/USD daily chart