The GBP/USD pair gains momentum, rising toward 1.2965 during Asian trading hours on Monday, as concerns over US President Donald Trump’s tariff policies weigh on the US Dollar (USD). Fears that these tariffs could drive inflation higher and slow economic growth have pressured the greenback, providing a boost to the British pound.
Last week, Trump imposed a 25% tariff on imported cars and light trucks, effective April 3, adding to existing 25% tariffs on steel and aluminum. Another round of reciprocal tariffs is expected to be announced on Wednesday. Analysts warn that these measures could negatively impact the US economy by stoking inflation while limiting the Federal Reserve’s (Fed) ability to cut interest rates. This scenario could further weaken the USD, supporting the GBP/USD pair in the short term.
“Recession risks have become elevated – to a 40% probability – on concerns that aggressive U.S. policies hit business and household sentiment,” said Bruce Kasman, chief economist at JPMorgan.
Meanwhile, strong UK economic data has provided additional support for the pound. February’s retail sales exceeded expectations, rising 1.0% month-over-month, compared to a downwardly revised 1.4% increase in January. The figure outperformed analysts’ forecasts of a 0.3% decline, signaling resilience in consumer spending.
“The better news on retail sales in Q1 provides a glimmer of hope that that might be changing,” said Ruth Gregory, an economist at Capital Economics.
With ongoing US economic concerns and solid UK retail data, the GBP/USD pair remains positioned for further gains in the near term.
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