Pound price rallies past $1.31 as upbeat UK GDP and dollar weakness fuel gains
British pound extends rally as economic growth data fuels bullish momentum
The British pound surged above $1.31 on Friday, building on a week-long rally as robust domestic data and broad-based U.S. dollar weakness provided strong tailwinds. At its current level, the sterling is trading near a six-month high, buoyed by stronger-than-expected GDP growth and investor skepticism over rapid rate cuts by the Bank of England.
The latest economic figures showed that the UK economy expanded by 0.5% in February—far exceeding expectations of a modest 0.1% increase. Growth was broad-based across services, manufacturing, and construction sectors. Notably, factory output gained momentum, possibly driven by firms accelerating production ahead of escalating U.S. tariffs under President Trump’s trade policy shift. This positive surprise has led markets to slightly pare back expectations for aggressive monetary easing, though three 25 basis point rate cuts are still priced in for 2025.
GBP/USD price dynamics (March 2025 - April 2025) Source: TradingView.
Dollar tumbles as U.S.-China trade tensions intensify
At the heart of the sterling’s recent strength is continued pressure on the U.S. dollar. The Dollar Index slipped below 99.50 on Friday—its lowest since April 2022—following China’s latest retaliatory tariff hike. Beijing’s Ministry of Finance confirmed it will raise import duties on U.S. goods to 125% starting April 12, following Washington’s decision to hike tariffs on Chinese imports to 145% when accounting for an additional fentanyl-specific duty.
These developments have rattled investor sentiment and weighed on the dollar, especially as concerns mount over recession risks and the Federal Reserve’s potential response. Markets now widely expect multiple rate cuts by the Fed this year, further eroding the dollar’s yield advantage.Eyes on upcoming U.S. data and BoE speeches
Later today, investors will monitor U.S. producer inflation data for March and the University of Michigan’s consumer confidence reading for April. Both figures could influence near-term dollar direction and shape Fed rate expectations. On the UK front, comments from Bank of England officials, including Deputy Governor Sarah Breeden, may offer fresh insights into policy thinking amid shifting global dynamics.
In earlier sessions, we flagged 1.2850 as a key pivot for GBP/USD. Now that the sterling has breached 1.31, the pair may consolidate gains unless U.S. data surprises to the upside or fresh risk-off sentiment reverses the dollar’s slide.
