GBP/USD price hits new low near $1.30 as U.S.-China trade truce strengthens dollar
GBP/USD drops to $1.30 amid stronger U.S. dollar following U.S.-China trade truce
The GBP/USD pair has fallen to its lowest level since mid-April, trading near the $1.30 mark, following a rally in the U.S. dollar driven by the U.S.-China trade truce. The agreement, which reduces U.S. tariffs on Chinese goods from 145% to 30% for 90 days and cuts Chinese tariffs on U.S. imports from 125% to 10%, has boosted market sentiment and alleviated fears of an extended trade war.
As a result, the U.S. Dollar Index (DXY) surged, signaling broader support for the greenback.
GBP/USD price dynamics (April 2025 - May 2025) Source: TradingView.
U.S. dollar strengthens amid trade deal optimism
This trade breakthrough has placed upward pressure on the U.S. dollar, reflecting expectations that the deal will ease inflationary concerns, especially in the U.S. Federal Reserve officials are expected to revisit their interest rate outlook as tariff reductions may ease concerns about rising inflation. The Fed has been closely monitoring the economic impact of tariff hikes, and this de-escalation could improve its policy stance.
Meanwhile, the European Central Bank (ECB) remains cautious about future monetary policy. Although ECB board member Isabel Schnabel has signaled that there's no immediate need for rate cuts, market participants remain concerned that further rate cuts may be necessary to support the Eurozone economy amid ongoing trade tensions. These mixed signals from the ECB have placed downward pressure on the euro, which has also contributed to the decline in the EUR/USD pair.
Technical outlook for GBP/USD
Looking at the GBP/USD chart, the breakdown below the 1.32–1.34 resistance zone has confirmed a bearish trend. The pair has been consolidating within this range for several days, but recent price action indicates that selling pressure is prevailing, pushing the exchange rate towards new lows around $1.30.
The relative strength index (RSI), currently at 33.68, suggests that the pair is nearing oversold territory, indicating the current downtrend could be running out of steam. However, unless GBP/USD breaks above the trendline resistance near $1.3296, the overall bias remains to the downside. The 20-period exponential moving average (EMA) on the 4-hour chart is below the 50, 100, and 200 EMAs, a classic indication of a bearish trend. The 200 EMA at $1.3270 continues to act as dynamic resistance.
As discussed earlier the EUR/USD and GBP/USD pairs face selling pressure, traders will closely monitor upcoming U.S. consumer price index (CPI) data for further clues on inflationary trends and potential Fed action. Similarly, the ECB's monetary policy outlook and the Eurozone’s economic performance will be key factors in shaping market sentiment for the euro and, in turn, the GBP/USD exchange rate.
