Pound Sterling flattens against USD ahead of US core PCE inflation.

The Pound Sterling trades sideways against the US Dollar above 1.2400 as investors focus on the US PCE inflation data for December.
President Trump’s tariff threats on BRICS and its North American peers have increased USD’s safe-haven appeal.
Investors expect the BoE to resume the interest rate-cut cycle on Thursday.

The Pound Sterling (GBP) trades in a tight range slightly above the key support of 1.2400 against the US Dollar (USD) in Friday’s European session. The GBP/USD pair steadies despite an increase in the US Dollar’s safe-haven demand on Thursday after United States (US) President Donald Trump reiterated his intentions to impose 25% tariffs on Canada and Mexico from Saturday and 100% on BRICS if they try to replace the US Dollar with a new currency in international trade.

The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades close to its weekly high of 108.20.

On his social media platform, TruthSocial, Trump said, “We are going to require a commitment from these seemingly hostile countries that they will neither create a new BRICS currency nor back any other currency to replace the mighty US Dollar, or they will face 100% tariffs.” He added that there is no chance that “BRICS will replace the US Dollar in International trade” or anywhere else, and any country that tries should say, “Hello to Tariffs, and goodbye to America!”

Market participants believe that President Trump’s higher tariffs would be inflationary for the US economy, which could force the Federal Reserve (Fed) to keep interest rates at their current levels for longer. On Wednesday, the Fed announced a pause in the easing policy cycle and kept borrowing rates unchanged in the range of 4.25%-4.50%.

Fed Chair Jerome Powell said that monetary policy adjustments will become appropriate when central bank officials see “real progress on inflation or at least some weakness in the labor market.”

In Friday’s session, investors will pay close attention to the US Personal Consumption Expenditures Price Index (PCE) data for December, which will be published at 13:30 GMT. The core PCE inflation, the Fed’s preferred inflation gauge, is estimated to have grown at a faster pace of 0.2% month-on-month from 0.1% in November, with annual figures growing steadily by 2.8%.