Pound steadies near $1.29 as markets await Trump tariff policy and UK economic response
Pound trades near 1.29 as UK braces for Trump’s tariff impact and delayed trade deal
The British pound traded cautiously against the U.S. dollar on Tuesday, hovering near 1.29 as investors braced for a new suite of reciprocal tariffs set to be unveiled by U.S. President Donald Trump on Wednesday. With trade tensions mounting and uncertainty clouding the global economic outlook, the GBP/USD pair remained largely range bound, reflecting a wait-and-watch approach from market participants.
Trump’s latest move, which targets countries with significant trade surpluses against the U.S., has already sparked concern among UK policymakers. Prime Minister Keir Starmer’s office acknowledged contingency planning ahead of the so-called “Liberation Day” tariff rollout, suggesting that a trade deal with Washington has been pushed beyond the Wednesday deadline.
The Office for Budget Responsibility (OBR) warned that Trump’s policies could cut the size of the UK economy by 1% and erode the fiscal buffer, potentially forcing the Bank of England into faster rate cuts. The central bank has already delivered one cut in 2025, and traders now price in two more reductions this year.
GBP/USD price dynamics (February 2025 - April 2025) Source: TradingView.
Pound pressured by inflation concerns and fiscal outlook
Adding to the headwinds, the British pound slipped below $1.29 earlier this week following a weaker-than-expected February inflation print and a downgraded Spring Statement. UK inflation is now projected to average 3.2% in 2025, higher than the October forecast of 2.6%.
Simultaneously, economic growth expectations have been cut to 1% from 2%, with public sector borrowing for 2025–26 expected to rise by £12.1 billion compared to previous estimates.Despite these challenges, the technical structure shows GBP/USD holding near the 61.8% Fibonacci retracement at 1.2930, with support around the 20-day EMA at 1.2890. Momentum indicators such as RSI are cooling from overbought territory, hinting at consolidation unless fresh bullish catalysts emerge.
All eyes are now on U.S. macroeconomic data, including ISM and S&P Global PMIs, along with potential retaliation from trade partners once Trump’s tariff measures are finalized. For the UK, whether the government can mitigate the economic fallout and accelerate a U.S.-UK trade deal will be key in shaping pound direction through Q2.
As highlighted in earlier coverage, the British pound remains vulnerable to geopolitical risks and inflation dynamics. This consolidation near key Fibonacci and EMA zones reaffirms the need to watch for external shocks and central bank signaling to gauge the next directional bias.
