GBP/USD Teeters Near 1.3550 as Tariff Chaos and Rate Speculation Shake Sterling
Sterling Rattled by Wave of U.S. Tariffs While UK Secures Temporary Shield
The GBP/USD pair continues to wrestle with geopolitical crosswinds, hovering around 1.3550 on Thursday after failing to hold the 1.3600 handle. Markets are digesting former President Donald Trump’s aggressive tariff agenda, which now includes a 50% levy on copper imports from Brazil and the U.S., alongside 25–30% duties targeting over a dozen nations. Only the United Kingdom and Vietnam have received carve-outs, yet the broader economic fallout from the global trade clash is still expected to impact UK growth. Despite the exemption, Britain’s export-dependent sectors remain vulnerable to rising global input costs and secondary supply disruptions.
UK GDP Preview Offers Fragile Support While Public Finance Concerns Escalate
Attention now turns to the upcoming UK GDP report, with economists forecasting a modest 0.1% expansion, rebounding from the prior -0.3% contraction. Though the bar is low, any upside surprise may offer tactical support to the British pound. Yet underlying fragilities persist: fiscal pressure on the UK government is mounting, with ballooning borrowing costs and weak industrial output amplifying investor caution. Domestic data is sparse this week, but upcoming figures on manufacturing and industrial production will serve as further sentiment litmus tests for sterling.
Dollar Index Slides as Rate Cut Bets Mount, Yet GBP/USD Fails to Capitalize
The U.S. Dollar Index (DXY) dipped to 97.30 after peaking earlier in the week, pressured by dovish Fed commentary and Trump’s tariff blitz. Federal Reserve minutes revealed growing internal support for a July rate cut, even amid lingering inflation risks. Initial jobless claims dropped to 227,000, surprising markets, but continuing claims surged to 1.97 million — the highest since early 2022. This split view of labor market health has introduced uncertainty into Fed path expectations. Still, despite dollar softness, GBP/USD has not gained meaningful traction, revealing structural weakness in sterling’s bid strength.
Technical Structure Reflects Indecision: GBP/USD Trapped Between EMAs and Fib Levels
On the technical front, GBP/USD price action remains compressed between multiple key moving averages. The pair is currently trading below the 30-period SMA, with the Relative Strength Index (RSI) stalling just under 50, indicating limited bullish momentum. The 1.3600 zone acts as major resistance, intersecting with a descending trendline and horizontal cap at 1.3611. The 4-hour chart shows the pair holding near the 0.5 Fibonacci retracement, which coincides with the 1.3600–1.3619 band — a critical zone for directional bias confirmation.
If buyers manage to pierce that resistance, upside targets extend toward 1.3645 and 1.3679. However, repeated rejections signal reluctance to chase risk in the current environment. A downside break below 1.3563 could trigger accelerated selling toward 1.3523, and a further slide to 1.3487, aligned with the 50-day SMA, cannot be ruled out. RSI momentum has turned mildly bearish again, and without a macro catalyst, sellers may regain the upper hand.
Traders React to BRICS Alignment Threats and Trump’s Trade Ultimatums
Trump’s warnings of 10% tariffs on nations aligning with the BRICS bloc added further pressure to the pound. While GBP/USD wasn’t hit directly, the indirect economic risk is notable. Trump’s administration unveiled tariff letters targeting Libya, Algeria, and the Philippines, further deteriorating the global trade environment. Michael Faulkender, U.S. Deputy Treasury Secretary, indicated that negotiations may continue even after the August 1 deadline, but markets appear skeptical, given the administration’s pattern of false starts and walk-backs on prior tariff waves.
Fed Speakers Reinforce Policy Dissonance as Yield Curve Flattens
Speeches from Fed officials Musalem, Waller, and Daly have kept markets on edge. While Musalem claimed the labor market is “at or near full employment,” he flagged tariff-linked inflation risks and warned that the USD’s weakness may amplify price pressures. Waller and Daly are expected to provide further guidance, though the current market view leans toward at least one cut in Q3. This anticipation has capped dollar strength, yet GBP/USD’s inability to rebound above 1.3600 shows traders are unwilling to position long ahead of clarity.
Volatility Squeezes Lower but Breakout Setup Builds
The narrowing of GBP/USD’s trading range and a flattening 20-day SMA at 1.3592 signals a coiling setup, likely to resolve with a sharp breakout or breakdown. The stochastic oscillator is positioning for a potential bounce, and the RSI remains above oversold levels, yet momentum remains weak. If 1.3600 is reclaimed and held, the pair could retest 1.3657, the current week’s high. On the flip side, a firm break below 1.3500 would trigger technical stop-loss flows, setting up a potential decline to 1.3487 and lower.
Pound Performance Weakens Broadly Against G10 Basket
Currency heatmap data shows GBP underperformed nearly all majors this week, slipping 0.68% against USD, and 0.31% versus CHF. Sterling managed a mild +0.17% gain versus NZD, but lagged behind the Japanese yen and Australian dollar. This underlines a broader loss of bullish conviction in sterling, despite the UK’s exclusion from Trump’s latest tariff wave.
Verdict: Sell — Weak Technicals and Fragile UK Macro Leave GBP/USD Exposed Below 1.3600
All data now considered, GBP/USD shows weakening structural support, deteriorating momentum, and fragile macro underpinnings. The inability to capitalize on a soft dollar, rising risk-off sentiment, and UK growth uncertainty leaves the pair vulnerable. So long as GBP/USD remains capped below 1.3619, the path of least resistance is lower. A break under 1.3550 confirms downside bias, making GBP/USD a Sell with a near-term target of 1.3487, and potential acceleration to 1.3420 if U.S. data surprises to the upside or UK GDP misses expectations.
