- Amid strong upward momentum, the GBP/USD pair rose to the 1.3128 resistance level, the highest level in about six months, driven by a sharp decline in the US dollar.
- Obviously, this was due to traders’ reaction to the latest round of reciprocal tariffs announced by US President Donald Trump.
- The US is set to impose a 10% tariff on all imports, with some countries subject to much higher rates. British imports will be subject to these tariffs.
Reactions to Trump’s Tariffs
This announcement triggered a flight to safe havens and a shift towards low-risk assets, as investors grew increasingly concerned about the potential impact on the global economy. For her part, British Foreign Secretary Reynolds stated that the US is Britain’s “closest ally” and that the government’s approach is to “remain calm and committed to securing this deal, which we hope will mitigate the effects of what was announced today.”
UK inflation was a factor in the pound’s decline ahead of the US tariffs. According to forex trading, the pound fell below $1.29, its lowest level in nearly two weeks, as traders reacted to the weaker-than-expected February inflation reading and the Spring Statement. Chancellor Reeves said that UK inflation is expected to average 3.2% in 2025, up from the 2.6% forecast in October. At the same time, growth forecasts for 2025 were lowered to 1% from 2%, and public sector net borrowing is expected to fall from £137.3 billion (4.8% of GDP) this year to £74.0 billion (2.1% of GDP) by 2029-30. However, compared to the October estimate, borrowing for 2025-26 is expected to be £12.1 billion higher (0.4% of GDP).
The UK government has already announced several policy changes to restore the government’s budget, including social welfare reforms, cuts in administrative spending, and a small set of tax changes. The UK’s annual inflation rate fell to 2.8% in February, slightly lower than the expected 2.9% but in line with the Bank of England’s forecast.
Trading Tips:
The pound will remain supported for some time, but beware of profit-taking.
UK avoids Trump’s tariffs, good for the exchange rate.
The British pound is experiencing sharp fluctuations following US President Donald Trump’s announcement of a 10% tariff on British imports. The 10% tariff imposed on Britain is much more lenient than those imposed on other countries, pushing the pound higher.
Here’s a look at some of the most significant tariffs:
20% on the European Union
34% on China
46% on Vietnam
24% on Japan
According to licensed trading company platforms, the British pound is rising against most major currencies, confirming its role as a safe haven in tariff trading. The GBP/USD exchange rate is higher at 1.3120, confirming that the dollar is a complete loser. This is understandable; ultimately, US consumers and businesses bear the costs of high imports. Also, the GBP/EUR exchange rate rose to 1.1989, a rise indicating that the EU’s 20% tariffs were lower than expected. In other markets, China-related currencies, such as the Australian dollar and the New Zealand dollar, are experiencing selloffs.
Trump asked a crowd gathered in the White House Rose Garden: “They’re charging us tariffs, and we’re charging them tariffs. How can anyone be upset?” Among other things, he specifically mentioned China and the European Union. “They’re deceiving us. It’s very sad to see this. It’s pathetic.”
He said, “India is very difficult. Very difficult.”
Regarding exchange rate reactions, we reported that the British pound entered the tariff announcements as a hedge due to its relatively low exposure. This is due to Britain’s declining manufacturing base, which keeps it balanced in goods trade with the United States.
Technical Analysis for the GBP/USD pair today:
Based on the performance on the daily chart, the GBP/USD pair is witnessing a strong upward movement towards levels that confirm this shift. Technically, from the resistance levels of 1.3120 and 1.3230, technical indicators will move towards strong overbought levels. Conversely, the currency pair will not abandon its upward recovery path without moving towards the support level of 1.2880 again. Finally, the GBP/USD may remain on its upward path until the reaction to the US jobs numbers tomorrow.
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