GBP/USD Forecast: Pound Retreats to Key 1.30 Level Amid Trade War Fears

The Pound-to-Dollar (GBP/USD) exchange rate pulled back from a six-month high last week, retreating to the psychologically crucial 1.30 level as US-China trade tensions rattled markets.

GBP/USD Volatility: Trump’s Tariffs Shake Markets

The GBP/USD exchange rate surged to $1.3196\ast \ast followingPresidentTrump’sannouncementofsweeping\ast \ast reciprocaltariffs\ast \ast ,butlatersettlednear\ast \ast$1.3003 as risk sentiment shifted.

• US Dollar (USD) plunged 2% on Thursday as new tariffs (ranging from 10% to over 50%) sparked fears of a global trade war and potential US recession.
• China retaliated with 34% tariffs, intensifying market uncertainty.
• Deutsche Bank warned of a USD “confidence crisis”, citing policy credibility concerns.

Pound (GBP) Holds Ground, But Risks Loom

Sterling initially benefited from hopes of a UK tariff exemption, but gains faded as:

• PM Keir Starmer hinted at UK retaliation, reducing optimism for a quick resolution.
• UK Services PMI revised lower, raising doubts about economic recovery.

GBP/USD Forecast: Key Drivers This Week

1. US Inflation Data & Fed Rate Cut Bets

• US CPI release could weaken the US Dollar if inflation cools, boosting Fed rate cut expectations.

2. UK GDP Report (February)

• A rebound in UK growth may support Sterling recovery.

3. Ongoing Trade War Uncertainty

• Further tariff escalations or diplomatic progress will drive GBP/USD volatility.

Technical Outlook: Where Next for GBP/USD?

According to Scotiabank FX strategists:

• GBP/USD has retreated to the critical 1.30 support level.
• Momentum is fading, with resistance near 1.31 and support at 1.28-1.29.
• A sustained break below 1.30 could signal further downside.