The GBP/USD pair attracted some buyers to reach around 1.2940 during the early European session on Monday, supported by a weaker US dollar. Uncertainty over the next round of tariffs imposed by US President Donald Trump, as well as concerns about a slowing US economy, are casting a shadow over USD/GBP. S&P will release the preliminary reading of the Global Manufacturing Purchasing Managers’ Index (PMI) for March later on Monday.
The US dollar remains under pressure, as analysts believe that Trump’s aggressive and erratic trade policies could lead to an economic recession. Trump declared April 2 the “Liberation Day” of the United States. On that day, he will apply so-called-for-tat tariffs aimed at matching U.S. tariffs with those imposed by his trading partners. He will also impose tariffs on sectors such as automobiles, pharmaceuticals, and semiconductors, which he has repeatedly stated will take effect that day.
The Bank of England left interest rates unchanged on Thursday, maintaining its benchmark interest rate at 4.5%. The markets widely anticipated the decision. Bank of England Governor Andrew Bailey said there was uncertainty at the moment, but added that interest rate setters still believed rates were “on a gradual downward trajectory”. Nomura Bank analysts George Buckley and Andre Szipanyak noted that “looking ahead, we still expect cuts of 100 basis points from the Bank of England to reach the final interest rate of 3.5% by early 2026.”
However, the UK’s gloomy economic picture, coupled with growing global policy uncertainty and weak confidence, could weaken GBP.
Sterling pair hovers amid economic worries
The GBP/USD below its pivot point at $1.29527 and is trading around $1.29487 at the start of the session. The pair is located between key technical levels, with the 50-day EMA almost converging at USD$1.29523, putting immediate pressure.
Representatives of the United States and Russia are expected to have further discussions later today. While these talks mitigate short-term geopolitical risks, the dollar remains under pressure amid lingering concerns about trade policy and global economic growth.
Market participants are closely watching the upcoming US PMI readings and the speech of Bank of England Governor Andrew Bailey, scheduled for 6:00 p.m. GMT, for further guidance.
A crucial close above the fulcrum may lead the price towards $1.29853, with an additional move towards $1.30141 if momentum builds. We still expect cuts of 100 basis points from the Bank of England to reach the final interest rate of 3.5% by early 2026.”
On the downside, if support fails at USD$1.29092, the pair could fall to USD$1.28602, as the 200-day EMA, close to USD$1.28766, could attract buyers at the lows.
Over the weekend, U.S. and Ukrainian officials met in Riyadh, where the Biden administration sought a ceasefire in the Ukrainian conflict.
The UK economy remains in a “sustenance” state as it awaits the next budget from Chancellor of the Exchequer Rachel Reeves and faces increased risks from US trade policies. Investors will be keeping a close eye on the UK’s CPI inflation data for February, looking for new momentum, which will be released later on Wednesday.
US dollar index falls amid economic concerns
The US dollar index (DXY) has fallen from recent highs and is now hovering near 104.00, reflecting growing investor caution. The dollar’s three-day winning streak has come to a halt as markets assess concerns about a possible slowdown in U.S. economic activity and continued trade uncertainty under the Trump administration.
The spotlight is now moving to today’s spot PMI data, which may provide a clearer view of the near-term strength of the economy. The S&P Global Spot Manufacturing PMI is due at 1:45 p.m. GMT, with expectations of 51.9 points, down slightly from the previous 52.7 points. The services sector spot PMI is also expected at 1:45 p.m. GMT, with expectations of 51.2 vs 51.0 previously.
Despite recent hawkish comments from Federal Reserve Chairman Jerome Powell, who pointed to a strong labor market and inflation approaching target, the dollar is struggling to maintain its momentum. The Powell’s comments reinforced the Fed’s cautious tone, but did not contribute to raising the value of the dollar amid mixed policy signals.
President Trump’s policy on tariffs remains a source of doubt. Earlier this month, his administration proposed imposing hefty tariffs on China-linked shipping, a move that disrupted supply chains and pressured key U.S. sectors, including agriculture and energy.
Investors are now awaiting whether these trade stances will ease following reports of renewed talks with Chinese officials.
Geopolitical talks ease tensions, but dollar remains weak Geopolitical developments provided some support to risk appetite, but were not enough to push the dollar towards sustainable strength.
