The Pound Sterling (GBP) recovered early losses and traded at 1.3470 against the US Dollar (USD) during Thursday’s European session, buoyed by a weakening Greenback after a major US court ruling and a positive UK economic outlook from the IMF.
The recovery follows a dip to 1.3415, as markets reacted to the US Court of International Trade invalidating former President Donald Trump’s sweeping tariff policy, citing constitutional overreach. The court criticized the use of the International Emergency Economic Powers Act (IEEPA) to justify broad import duties, issuing a 10-day deadline for a permanent injunction against the so-called “Liberation Day” tariffs.
US Dollar Weakens, Helping GBP/USD Rebound
The US Dollar Index (DXY), which earlier rose to 100.50, retreated to 100.10, losing momentum after the verdict. The Greenback had initially gained alongside US bond yields and equities, but the legal setback prompted a reassessment of risk across markets.
UK Economic Optimism Lifts Sterling Further
In addition to the US court ruling, the International Monetary Fund (IMF) raised its UK GDP forecast for 2025 from 1.1% to 1.2%, supporting further gains in the Pound. The revision follows a strong 0.7% Q1 expansion reported by the Office for National Statistics (ONS), up from the previous quarter’s 0.1% growth.
Investors are also dialing back expectations of a Bank of England (BoE) rate cut in June after stronger-than-expected UK Consumer Price Index (CPI) and April retail sales data showed continued inflationary pressures and resilient consumer demand.
Market Focus Shifts to US PCE Inflation Data
Traders now look ahead to Friday’s release of the US Personal Consumption Expenditures (PCE) Price Index, the Federal Reserve’s preferred inflation gauge. Core PCE is projected to rise by 2.5% year-on-year, slightly lower than the previous 2.6% figure. Any upside surprise could revive USD strength and weigh on GBP/USD.
GBP/USD Holds Above Key Support
From an economic standpoint, the GBP/USD buying interest near the 1.3430 – 1.3440 support area, the September 26th high. There is a bullish outlook for the GBP/USD as long as it trades above the 20-day EMA at 1.3385.
Nonetheless, the 14-day RSI is barely above the 60 level at the moment. If it moves below the 60 level, it may indicate weakening bullish momentum. It appears there is upside resistance near 1.3750 January 13, 2022 high.
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