- GBP/USD weakened as the US Dollar was buoyed by a more optimistic tone from US President Donald Trump.
- US President Donald Trump helped calm markets by clarifying he has no intention of removing Fed Chair Jerome Powell.
- The Pound Sterling struggles due to investor caution about the Bank of England’s monetary policy outlook.
GBP/USD extended its losses during Wednesday’s Asian session, trading around 1.3300 after pulling back from a seven-month high of 1.3424 recorded in the previous session. The pair weakened as investor appetite shifted back toward US assets, including the US Dollar (USD), buoyed by a more optimistic tone from US President Donald Trump.
President Trump helped ease market concerns by affirming his support for Federal Reserve (Fed) Chair Jerome Powell, stating, “The press runs away with things. No, I have no intention of firing him. I would like to see him be a little more active in terms of his idea to lower interest rates.”
Further improving sentiment, US Treasury Secretary Scott Bessent described the ongoing trade conflict with China as "unsustainable" and voiced confidence in resolving it. Although formal negotiations have yet to begin, Bessent reportedly told attendees at a private JP Morgan Chase & Co. event in Washington that a deal may soon be achievable.
Trump reinforced this optimism, highlighting progress in trade talks with China. While he dismissed the prospect of steep tariff increases—clarifying that tariffs would not climb to 145%—he also stated that existing tariffs would remain in place for the time being.
Meanwhile, the Pound Sterling (GBP) remains under pressure as investors grow more cautious about the Bank of England’s (BoE) monetary policy outlook, particularly in light of international trade tensions driven by Trump’s administration. Speculation is mounting that the BoE may opt to cut interest rates at its May policy meeting due to ongoing global economic uncertainty.
Adding to the pressure, the UK’s trade relationship with the US is in flux after the Trump administration imposed 10% reciprocal tariffs and 25% levies on steel and foreign cars. While a trade deal remains possible, current dynamics weigh on GBP sentiment.
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
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