The Pound Sterling (GBP) edged higher against the US Dollar (USD) during Thursday’s European session, trading around 1.3580, as the Greenback extended its weakness following dismal US economic data and fresh Trump tariff hikes. The move marked a notable performance for GBP/USD, with the pair consolidating near recent highs.
Trump’s 50% Tariff Shocks Undermine US Economic Confidence
President Donald Trump ramped up tariffs on steel and aluminum to 50%, which spooked markets on Wednesday. The rationale behind raising taxes on imports was to spur more domestic production to insulate us from future tariff increases. The concern was that it was just feeding into inflation and setting up a slowdown in economic activity
The US ADP Employment Change report stoked fears further with a mere 37K jobs added in May, well below the forecast for 115k and the worst hiring since January 2021. A lot of fears about the labor market tapering off.
If that wasn’t bearish enough, service sector activity shrank unexpectedly, and the ISM Manufacturing PMI continued to reflect further factory contraction, which simply points to weakness in the economy.
BoE’s Steady Hand Lends Support to the Pound
As caution increases amid economic discussions in the United States, the Bank of England is committed to a cautious and gradual policy approach. BoE Governor Andrew Bailey testified to Parliament’s Treasury Committee that although inflation is coming down, the outlook is uncertain. His statements reassured markets that the BoE would not soon rush into cuts to interest rates, given that inflation remains a concern, along with stability in the labor market in the UK.
GBP/USD Consolidates Above 1.3550
From a technical standpoint, GBP/USD remains strong with solid support near 1.3550, while trading above the 20-day Exponential Moving Average (EMA) at 1.3443. The Relative Strength Index (RSI) is still above 60, which indicates bullish momentum is intact. Resistance remains at 1.3750, which is the January 2022 high. Support is expected to remain at the 20-day EMA area around 1.3443 and the September 2023 high of 1.3434, ultimately confirming the active uptrend.
Conclusion
As Trump’s tariff war marches on while US labor demand dips and the BoE keeps things steady, the Pound Sterling has managed to emerge as a relative winner in the forex space. However, with the NFP report soon to be released and US-China trade headlines, the GBP/USD trajectory is in a dynamic location heading into the rest of the week.
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