GBP/USD Forecast: Pound Sterling on edge as markets await tariff headlines
- GBP/USD fluctuates in a narrow band above 1.2900 on Wednesday.
- The pair could extend its sideways action until later in the American session.
- US President Donald Trump will announce tariffs on "Liberation Day."
Following Monday's modest decline, GBP/USD found a foothold on Tuesday and closed the day virtually unchanged. The pair continues to move sideways above 1.2900 in the European session on Wednesday as investors move to the sidelines ahead of the highly-anticipated tariff announcements from the US.
British Pound PRICE Last 7 days
The table below shows the percentage change of British Pound (GBP) against listed major currencies last 7 days. British Pound was the weakest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.08% | 0.15% | -0.13% | 0.20% | -0.10% | -0.16% | 0.22% | |
| EUR | 0.08% | 0.23% | -0.08% | 0.26% | -0.02% | -0.09% | 0.29% | |
| GBP | -0.15% | -0.23% | -0.25% | 0.04% | -0.25% | -0.31% | 0.09% | |
| JPY | 0.13% | 0.08% | 0.25% | 0.33% | 0.01% | -0.03% | 0.36% | |
| CAD | -0.20% | -0.26% | -0.04% | -0.33% | -0.26% | -0.35% | 0.05% | |
| AUD | 0.10% | 0.02% | 0.25% | -0.01% | 0.26% | -0.06% | 0.33% | |
| NZD | 0.16% | 0.09% | 0.31% | 0.03% | 0.35% | 0.06% | 0.39% | |
| CHF | -0.22% | -0.29% | -0.09% | -0.36% | -0.05% | -0.33% | -0.39% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).
The US Dollar struggled to outperform its rivals following weak macroeconomic data releases in the American session on Tuesday. The ISM Manufacturing Purchasing Managers Index (PMI) declined to 49 in March from 50.3 in February and JOLTS Job Openings fell to 7.56 million in February from 7.76 million in January. Both of these readings came in below analysts' estimates.
US President Donald Trump will unveil the new tariff regime at 20:00 GMT on Wednesday.
US Treasury Secretary Scott Bessent said late Tuesday that the tariff amounts announced on Wednesday will be the highest they will go. Countries could then take steps to bring the tariffs down, Bessent further explained.
It will not be an easy task to assess how tariff decisions could impact the US Dollar (USD) valuation in the near term. In case tariffs are not as aggressive as feared, the immediate reaction could boost market mood and make it difficult for the USD to find demand. However, investors could also turn optimistic about the economic outlook. In this scenario, market participants could price in a hawkish Federal Reserve outlook and allow the USD to stay resilient against its peers.
GBP/USD Technical Analysis
The Relative Strength Index (RSI) indicator on the 4-hour chart holds steady near 50 and GBP/USD continues to fluctuate at around the 20-period, 50-period and the 100-period Simple Moving Averages (SMA), reflecting a lack of directional momentum.
Looking south, the first support level could be seen at 1.2900 (lower limit of the ascending channel) before 1.2800, where the 200-day SMA is located. On the upside, resistances could be spotted at 1.2940 (20-day SMA), 1.3000 (static level, round level) and 1.3050 (mid-point of the ascending channel).
Tariffs FAQs
Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.
Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.
There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.
During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.
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Author
Eren Sengezer
FXStreet
As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.
