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∗∗followingPresidentTrump’sannouncementofsweeping∗∗reciprocaltariffs∗∗,butlatersettlednear∗∗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.
