Pound Sterling Slips vs Euro and Dollar as Tech Selloff Sparks Safe-Haven Demand

January 29, 2025 - Written by David Woodsmith

STORY LINK Pound Sterling Slips vs Euro and Dollar as Tech Selloff Sparks Safe-Haven Demand

The Pound to Dollar exchange rate (GBP/USD) edged lower on Tuesday as risk-averse sentiment saw investors flock to the safe-haven Greenback.

At the time of writing, GBPUSD was trading near $1.2428, down approximately 0.2% from Tuesday’s opening levels.

The US Dollar (USD) continued its upward trajectory on Wednesday, consolidating gains made during the overnight session.

This followed a sharp selloff in US tech stocks, triggered by investor concerns over the competitive threat posed by China’s newly unveiled AI model, DeepSeek.

Adding to the Greenback’s safe-haven appeal were fresh tariff warnings from Donald Trump, who reiterated his plans to implement 25% tariffs on imports from Mexico and Canada.

However, USD gains were tempered by disappointing durable goods orders data, which revealed an order growth unexpectedly contracted for a second consecutive month in December.

Pound (GBP) Weakens Amid Deteriorating Risk Sentiment

The Pound (GBP) struggled to hold its ground on Tuesday as market-wide risk aversion weighed on Sterling.

Compounding these pressures were downward revisions to the UK’s growth outlook by Morgan Stanley.

The investment bank downgraded its forecast for 2025 UK GDP growth from 1.3% to just 0.9%.

This projection significantly lags behind the Bank of England’s (BoE) estimate of 1.5% growth, fuelling speculation that the BoE may pivot toward a looser monetary policy if upcoming data aligns with Morgan Stanley’s forecast.

GBP/USD Forecast: Fed Rate Decision to Drive the US Dollar Higher?

Looking ahead, the Pound US Dollar exchange rate could face significant volatility on Wednesday as the Federal Reserve announces its latest interest rate decision.

While the Fed is expected to keep rates steady this month, its forward guidance will be key.

Should policymakers adopt a hawkish stance and suggest no imminent plans to resume rate cuts, the US Dollar could see a sharp boost.

Meanwhile, attention will also turn to Bank of England Governor Andrew Bailey’s testimony before the Treasury Select Committee. Any indication that a February rate cut is under consideration may weigh further on the Pound.

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TAGS: Pound Dollar Forecasts