Pound price surges above $1.31 as Trump tariffs weigh on U.S. dollar
Pound climbs above $1.31 as Trump imposes 10% import tariffs, sparking risk-off sentiment
The British pound rallied sharply against the U.S. dollar on Thursday, breaching the $1.31 mark for the first time in nearly six months as traders reacted to the newly imposed U.S. tariffs by President Donald Trump. The tariffs, set at a blanket 10% on all imports, with higher rates targeting specific countries, triggered recession fears that weakened the greenback across global markets.
The U.S. Dollar Index (DXY) slumped to 102.7, as investors reassessed the outlook for the U.S. economy. With Trump’s protectionist policies now officially in effect, concerns have intensified that the U.S. may slip into a recession, pressuring the Federal Reserve to act. Markets are now pricing in approximately 62 basis points of rate cuts from the Fed by year-end, with inflation concerns rising alongside the possibility of demand destruction.
GBP/USD price dynamics (March 2025 - April 2025) Source: TradingView.
UK avoids harsh retaliation, keeps market appeal intact
The UK was among the least affected by the tariff regime, with only a 10% duty levied—lower than that faced by other major economies. Prime Minister Keir Starmer emphasized a "cool and calm" approach, indicating that Britain would not immediately retaliate. His stance reassured investors, who perceived the UK as a relatively insulated trade partner amid the rising global tension.
Nonetheless, the UK could still face indirect pressure. British firms may encounter competitive pricing from foreign companies forced to reduce their prices globally due to lost access to U.S. markets. Despite this, the pound’s strength persisted, supported by market expectations that the Bank of England would ease monetary policy less aggressively than its U.S. counterpart. Rate cut expectations for the BoE rose modestly, now sitting at 62 basis points by December.
Technical outlook favors bullish continuation
Technically, the GBP/USD pair found solid support at 1.293, aligning with the 61.8% Fibonacci retracement level. The 20-day EMA remains upward sloping, and the RSI climbed to 70, signaling renewed bullish momentum. Immediate resistance lies near the September 26 high of 1.3434.
As noted in earlier GBP/USD coverage, the pair was showing signs of building bullish momentum around the 1.293 area. Today’s surge confirms that the pair was gearing for a breakout, with the current rally supported by technical indicators and a softer dollar. A close above 1.311 opens the door for further gains toward 1.3434.
