Pound climbs above $1.295 as weak U.S. Dollar and solid UK data support gains
Pound holds near 1.2965 as upbeat UK retail sales and U.S. tariff fears drive gains
The British pound extended modest gains against the U.S. Dollar on Monday, trading near 1.2965 in Asia after upbeat UK retail data and growing recession fears in the U.S. weighed on the greenback. GBP/USD added 0.21% during the session, building on last week’s momentum following a strong February retail performance in the United Kingdom.
The U.S. Dollar lost ground as investor sentiment soured following President Donald Trump’s escalating tariff agenda. Markets are reacting to the recently announced 25% levy on imported vehicles and light trucks set to take effect on April 3, with reciprocal tariff announcements expected later this week. Analysts warn that the measures could spark inflation while simultaneously undermining business sentiment and consumer demand.
JPMorgan’s chief economist, Bruce Kasman, noted that “recession risks have become elevated—to a 40% probability—on concerns that aggressive U.S. policies hit business and household sentiment.” Traders believe the new tariffs could complicate the Federal Reserve’s ability to lower rates while still pushing inflation higher in the short term.
GBP/USD price dynamics (February 2025 - March 2025) Source: TradingView.
Pound supported by stronger-than-expected retail sales
Meanwhile, the pound found support after UK retail sales rose 1.0% month-over-month in February, significantly outpacing forecasts of a 0.3% decline. Though the prior reading was revised down to 1.4% from 1.7%, the unexpected resilience in consumer spending provided a much-needed boost to the Sterling. Ruth Gregory of Capital Economics commented, “The better news on retail sales in Q1 provides a glimmer of hope that that might be changing,” referring to the UK’s recent economic softness.
Looking ahead, market participants will closely monitor the U.S. reciprocal tariff announcement on Wednesday, as well as further signs of economic stress in the U.S. that may shape expectations for Federal Reserve policy.
We previously noted GBP/USD’s sensitivity to UK data surprises and U.S. macro-political risks. The latest movement aligns with this narrative, as stronger domestic data and a weakening U.S. outlook have helped the Pound maintain traction above 1.295. Ongoing trade developments and Fed positioning remain key catalysts for near-term direction.
