GBP/USD Falls as Trump Imposes 30% Tariffs on EU and Mexico
- GBP/USD declines with mixed reactions in the market following tariff announcements.
- US inflation is projected to rise to 2.7% year-on-year, reflecting consumer impacts from tariffs.
- Slowdown in UK GDP may increase chances of a rate cut from the Bank of England.
Pound Sterling (GBP) dipped by 0.18% during the North American trading session, as the US Dollar (USD) bounced back after President Donald Trump’s announcement of tariffs on imports from the European Union and Mexico. Initially, this move sparked a risk-averse response; however, stock market sentiment shifted more positively, though currency traders remained cautious. As of now, GBP/USD is trading at 1.3453.
Tariff Impacts and Interest Rate Speculations
Over the weekend, Trump declared 30% tariffs on imports from the EU and Mexico, which, interestingly, some analysts argued would be less impactful than Canada’s higher 35% tariffs imposed last Thursday.
This week has been somewhat turbulent for me personally—I’ve been feeling under the weather. On a brighter note, there’s a prevailing sense among traders that the three major US trade partners (Canada, EU, and Mexico) will reach a deal before the deadline on August 1.
Looking at the economic data, the upcoming inflation figures are set to be released on Tuesday. The Consumer Price Index (CPI) is expected to climb from 2.4% to 2.7% in June. If we exclude volatile elements like food and energy, we might see a threshold between 2.8% and 3%, indicating clearly that tariffs are weighing on consumers.
This situation creates pressures on the Federal Reserve. We’ve recently noticed shifts in attitudes regarding monetary policy. Officials like Waller and Gov. Bowman, alongside San Francisco Fed President Mary Daley, seem to be moving away from a dovish stance, hinting at at least two potential rate cuts by 2025.
In the UK, the Gross Domestic Product (GDP) figures indicate a slowing economy, increasing the likelihood of a rate cut from the Bank of England (BOE). That said, traders are anxiously awaiting the upcoming CPI numbers in the UK. Any signs of weakness may prompt GBP/USD sellers to further lower their positions, especially after the pair peaked at 1.3788 on July 1.
GBP/USD Price Forecast: Technical Analysis
The GBP/USD pair dropped below the 1.3500 mark, trending toward a 50-day simple moving average (SMA) of 1.3495, falling under 1.3450 as well. The Relative Strength Index (RSI) suggests a bearish momentum on daily charts. However, it appears the bullish support line stands at 1.3369 from June 23. On the other hand, if the pair manages to recover above 1.3500, it may challenge a 20-day SMA at 1.3583.
British Pound Prices This Month
The following table highlights the changes in the British pound (GBP) against major currencies this month, with the GBP performing notably well against the Japanese yen.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.89% | 2.12% | 2.40% | 0.58% | 0.28% | 1.86% | 0.51% | |
| EUR | -0.89% | 1.23% | 1.41% | -0.31% | -0.50% | 0.95% | -0.36% | |
| GBP | -2.12% | -1.23% | 0.28% | -1.49% | -1.71% | -0.27% | -1.56% | |
| JPY | -2.40% | -1.41% | -0.28% | -1.74% | -2.07% | -0.55% | -1.83% | |
| CAD | -0.58% | 0.31% | 1.49% | 1.74% | -0.31% | 1.24% | -0.08% | |
| AUD | -0.28% | 0.50% | 1.71% | 2.07% | 0.31% | 1.46% | 0.15% | |
| NZD | -1.86% | -0.95% | 0.27% | 0.55% | -1.24% | -1.46% | -1.30% | |
| CHF | -0.51% | 0.36% | 1.56% | 1.83% | 0.08% | -0.15% | 1.30% |
The heatmap illustrates the performance of the British pound (GBP) against various major currencies this month. The left column lists the base currency, and the top row shows the target currency. For example, selecting GBP and USD will display the respective exchange rate performance.
