GBP/USD gathers strength to near 1.3400 on Trump’s tariff threats

The GBP/USD pair gains traction to around 1.3400 during the early Asian session on Monday. The US Dollar (USD) weakens against the Pound Sterling (GBP) amid US President Donald Trump's latest tariff threats against Europe over ‌Greenland. The US markets are closed in observance of the Martin Luther King Jr. Day holiday on Monday.

Reuters reported on Saturday that he would impose an additional 10% import tariff from February 1 on goods from Denmark, Norway, Sweden, France, Germany, the Netherlands, Finland and the United Kingdom (UK) until the US is allowed to buy Greenland. 

European Union (EU) ambassadors reached a broad agreement on Sunday to intensify efforts to dissuade Trump from imposing levies on European allies, while France proposes to respond with a range of previously untested economic countermeasures. The Greenback faces some selling pressure following this headline as traders assess the longer-term implications of Trump's latest move on the currency's standing.

"While you would argue that the tariffs threaten Europe, in fact, it's actually the dollar that is bearing the brunt of it, because I think markets are pricing in increased political risk premia on the U.S. dollar," said Khoon Goh, head of Asia research at ANZ.

Traders will closely monitor the release of the UK employment and Consumer Price Index (CPI) data, which will be released later this week. These reports could offer some hints about the Bank of England’s (BoE) monetary policy outlook. In case of the weaker-than-expected outcomes, these could drag the Cable lower against the USD in the near term.