Summary:
GBP/USD holds near 1.3600 amid Trump's new tariff threats and rising UK gilt yields, with markets awaiting key UK data and Fed minutes.
The GBP/USD currency pair remained cautiously steady around the 1.3600 mark on Wednesday, navigating a complex landscape of international trade tensions and mounting domestic fiscal risks. As markets absorbed fresh threats of U.S. tariffs and reacted to the UK's evolving fiscal outlook, the British pound settled into a tight trading range with limited momentum in either direction.
Market sentiment was subdued after former U.S. President Donald Trump announced plans to implement a new wave of tariffs targeting imports from seven countries, including substantial levies on copper and pharmaceutical products. During a cabinet meeting on Tuesday, Trump declared his intention to impose a 50% tariff on copper imports and warned of a further 200% tariff on pharmaceuticals starting next year. He also threatened a 10% duty on countries pursuing de-dollarisation, particularly within the BRICS group.
These developments have stoked concerns about a resurgence of protectionist policies, echoing trade tensions that previously rattled global markets during Trump's earlier tenure. Despite the absence of a clear implementation timeline, Trump's rhetoric triggered caution across financial markets, though the broader U.S. Dollar Index (DXY) held firm near 97.50. just shy of its weekly high.
While geopolitical developments weighed on sentiment, the pound also contended with a complicated fiscal backdrop at home. UK Chancellor Rachel Reeves recently abandoned self-imposed fiscal rules to push through sweeping welfare reforms, resulting in increased gilt (UK government bond) sales and a rise in yields. The benchmark 10-year gilt yield climbed to approximately 4.63%, now one of the highest among developed economies, trailing only two peers globally.
According to the Office for Budget Responsibility (OBR), the UK is now facing some of the steepest borrowing costs in the developed world. Projections suggest that the additional welfare spending could add £4.8 billion to the national fiscal burden by 2029–2030. Higher gilt yields are translating into elevated interest costs, posing long-term risks to public finances.
Looking ahead, traders are eyeing Friday's release of the UK's May GDP and industrial production data for signs of underlying economic strength or weakness. Meanwhile, in the U.S., attention is shifting to the upcoming release of the Federal Open Market Committee (FOMC) minutes from the July 17–18 meeting, which may offer insight into the Fed's policy trajectory amid a still-fragile inflation backdrop.
Trump's forthcoming announcements concerning tariff plans for seven countries could create additional volatility, though any immediate impact may be limited by the deferral of reciprocal tariff enforcement to 1 August. Still, investors remain watchful, especially as uncertainty over trade relations resurfaces.
From a technical perspective, GBP/USD continues to consolidate just below the 1.3600 level. The pair is trading near its 20-day Exponential Moving Average (EMA) around 1.3590. highlighting a lack of directional conviction. The 14-day Relative Strength Index (RSI) hovers close to the neutral 50 mark, further underscoring the absence of strong momentum.
Key support lies at the psychological 1.3500 level, while resistance looms near the three-and-a-half-year high around 1.3800. A break in either direction could signal the next meaningful move, though for now, price action remains range-bound.
The GBP/USD pair is treading water as global and domestic uncertainties unfold. While Trump's trade policy threats and the UK's fiscal challenges have yet to trigger a decisive move, they continue to shape investor sentiment. With critical data releases and policy updates on the horizon, the pound may soon be forced to choose a direction. For now, however, caution dominates, and GBP/USD holds its ground in the face of uncertainty.
Disclaimer: This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by EBC or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.
Dow slips 0.37% to 44,240.76, S&P 500 down 0.07% at 6,225.52 as global markets react to fresh US tariff threats and ongoing trade uncertainty.
2025-07-09
As of June 27, foreign capital has flowed into Japan's stock market for 13 weeks, with investments continuing to rise despite market challenges.
2025-07-09
Gold prices hovered near a one-week low on Wednesday, pressured by a stronger dollar, with the Fed's meeting minutes set for release later today.
2025-07-09
