Pound price steadies near 6-month high as traders assess Trump tariffs and BoE rate cut outlook
GBP/USD holds above 1.31 as traders assess Trump tariffs and BoE rate policy path
The British pound climbed to its highest level in nearly six months, breaching $1.32 before settling around $1.31 in Friday’s European session. The rally was initially fueled by broad-based weakness in the U.S. dollar following President Donald Trump’s sweeping reciprocal tariffs, which sparked fears of a global slowdown.
Market sentiment shifted toward risk-off assets, with the pound benefiting despite the UK being among the nations subject to the baseline 10% tariff.
While the UK avoided higher duties imposed on other trade partners like the EU and China, its inclusion in the tariff framework added a layer of uncertainty. Nonetheless, Prime Minister Keir Starmer signaled a measured response, stating that the UK would act “with cool and calm heads.” Traders interpreted the limited impact of the tariffs on UK trade as a relative win for Britain, fueling the pound’s strength.
GBP/USD price dynamics (February 2025 - April 2025) Source: TradingView.
Overbought levels temper further gains
Despite the recent breakout, analysts noted that GBP/USD may enter a consolidation phase after the sharp advance. The pair surged to 1.3207 before retracing to 1.31 on Thursday, suggesting that overbought conditions could cap short-term upside. According to FX strategists Quek Ser Leang and Peter Chia, the pound is likely to trade between 1.3040 and 1.32 in the near term, with a possible retest of 1.3300 if the 1.2940 support holds.
Meanwhile, rate cut expectations continue to shape the macro outlook. Markets are now pricing in approximately 62 basis points of Bank of England rate cuts by December, up from 54 bps a day earlier. This shift reflects investor expectations that the UK may follow the global trend toward easing if trade tensions drag down growth.
Key data and technical levels to watch
With no immediate UK data on deck, traders will monitor developments in the global risk environment and U.S. economic releases, including the ISM Services PMI. A sustained move above 1.32 could open the door to test the major resistance at 1.33, while a break below 1.2940 would signal deeper retracement.
As covered in prior updates, the GBP/USD pair had been building support near the 1.2930 zone, aligning with the 61.8% Fibonacci retracement. That base has now triggered a breakout, but with technical indicators stretched, traders may see sideways movement until fresh drivers emerge.
