- GBP/USD has reached a new high, hitting a 45-month peak on Tuesday.
- The US dollar has weakened significantly, allowing the pound to rise dramatically.
- The market is preparing for the upcoming US Non-Farm Payroll data release on Thursday, with a federal holiday on Friday.
On Tuesday, GBP/USD soared to its highest level in 45 months, closing in on its four-year peak. This bump can be attributed to the ongoing decline of the US dollar. The current trade policy, worsened by President Trump’s recent comments about potential tariffs, has left dollar buyers scrambling as the pound continues to climb.
While economic reports and central bank statements typically grab attention, trade issues and budget debates took center stage on Tuesday. The US Senate has passed several iterations of President Trump’s ambitious budget plan. With the aim of eliminating the federal deficit, Trump’s proposed spending bill stands to significantly increase the national debt over the next decade.
Trump stirred concern in the markets on Tuesday by threatening Japan with tariffs between 30-35% on imported goods. His history with import taxes has been mixed, frequently changing direction week by week. He also confirmed there would be no further delays to a previously announced mutual tariff package which is set to be detailed by April 9th.
Earlier this week, US non-farm payroll data was released on the 1st, ahead of the federal holiday on Friday. On Thursday, the NFP is expected to show a drop from 139K to 110K, with indications of possible downward revisions in previous months’ numbers.
GBP/USD price outlook
This week, GBP/USD wrapped up positively, climbing past 1.3780 for the first time since October 2021, as the US dollar continued to weaken broadly.
However, there are concerns that GBP/USD prices might be climbing too quickly, as technical indicators suggest they are approaching overbought levels, which could signal potential pullbacks ahead.
GBP/USD Daily Chart
Pound Sterling FAQ
Pound Sterling (GBP) is the world’s oldest currency, established in 886 AD, and serves as the official currency of Britain. As of 2022, it ranks as the fourth most-traded currency globally, making up about 12% of forex transactions, with an average daily trading volume of $630 billion. Its primary trading pair is GBP/USD, also known as “cable.”
The key factor influencing the value of the pound is the monetary policy set by the Bank of England (BoE). The BoE aims for a stable inflation rate around 2%. To reach this, it adjusts interest rates. If inflation rises too high, the BoE may raise rates, making borrowing expensive, which generally supports the pound. Conversely, if growth slows and inflation dips, the BoE may lower rates to stimulate the economy.
Economic indicators such as GDP, PMI for manufacturing and services, and employment rates can impact the pound’s value. A strong economy can attract foreign investment and potentially lead to rate hikes by the BoE, thereby supporting GBP. Conversely, weak economic data can lead to a decline in the pound.
Another crucial data point for the pound is the trade balance, which measures the difference between exports and imports. Strong exports can boost demand for the currency. Consequently, a positive trade balance tends to strengthen the pound.
