- GBP/USD could regain ground as the US dollar might face downward pressure due to economic uncertainty in the United States.
- Softening US economic indicators have raised the possibility of the Federal Reserve implementing two interest rate cuts in 2025.
- Trump has provided British exporters with temporary relief from a sudden 50% tariff on steel and aluminum.
GBP/USD is expected to recover some of its recent losses, aiming for around 1.3550 during Thursday’s Asian trading hours. While the pair is showing depreciation, the US dollar appears to be gaining strength through a technical correction. However, it’s possible that the dollar could be impacted by declining risk sentiments stemming from heightened tariff uncertainties, which may hinder US economic growth and limit how low the pair might go.
The Institute for Supply Management (ISM) reported that the Services Purchasing Managers Index (PMI) dropped from 51.6 in May to 49.9. This figure fell short of expectations, which were around 52.0. Additionally, the US ADP private sector only added 37,000 jobs in May, a significant contrast to the anticipated 115,000 and a decline from April’s revised figure of 60,000.
On Wednesday, President Trump expressed on social media his call for Federal Reserve Chairman Jerome Powell to reduce policy rates. He noted, “ADP number out!!! ‘Too late’ Powell now needs to lower his rate. He’s incredible!!! Europe has dropped nine times,” indicating his perspective on the Fed’s actions.
Moreover, Minneapolis Federal Reserve President Neil Kashkari mentioned signs of a slowing labor market. However, there remains substantial uncertainty about the economy, and the Fed should stay vigilant to gauge how the economy reacts to this ambiguity.
Additionally, on Wednesday, S&P Global released data indicating that the UK Purchasing Managers’ Index (PMI) composite figure exceeded the preliminary estimate of 49.4. The services PMI also saw a slight increase to 50.9, suggesting some minimal growth despite remaining weak.
In another development, UK exporters are now looking at a 25% tariff as an executive order was signed on Tuesday to provide temporary relief from steep US tariffs on steel and aluminum.
