GBP/USD Tumbles as Trump’s Trade War Shakes Global Markets

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GBPUSD is moving in a downtrend channel and the market has fallen from the lower high area of the channel

#GBPUSD Analysis Video

The British Pound (GBP) is struggling against the US Dollar (USD) as global markets turn risk-averse. Investors are closely watching upcoming economic data and the Bank of England’s (BoE) interest rate decision. Meanwhile, tariffs imposed by former US President Donald Trump on major trading partners have shaken market confidence, pushing investors toward safer assets like the US Dollar.

Let’s dive deeper into what’s happening and how it’s impacting the Pound Sterling.

Why Is the British Pound Struggling?

Market Jitters Following Trump’s Tariffs

Recently, Trump imposed heavy tariffs on Canada, Mexico, and China, creating uncertainty in global trade. Investors tend to move their money to safer assets when uncertainty strikes, and the US Dollar is often seen as a “safe haven.” This shift has pushed the Pound lower while strengthening the Dollar.

Investors Await Key Economic Reports

This week, the focus is on key employment data from the US and the BoE’s interest rate decision. These reports will provide insight into the health of both economies, influencing currency movements.

The Federal Reserve (Fed) recently decided to keep interest rates steady, but markets are watching closely to see how long this policy will last. Fed Chair Jerome Powell has made it clear that any changes will depend on inflation trends and the strength of the labor market.

The Bank of England’s Big Decision

Is a Rate Cut Coming?

One of the biggest factors affecting the Pound right now is speculation that the BoE will cut interest rates. The central bank is widely expected to reduce rates by 25 basis points (bps), bringing them down to 4.5%.

The BoE’s nine-member Monetary Policy Committee (MPC) is mostly in favor of the rate cut, with seven members expected to vote for it. However, two members, including the typically hawkish Catherine Mann, are likely to push for rates to remain unchanged.

GBPUSD is moving in a descending channel

Why Would the BoE Cut Rates?

There are two main reasons why the BoE might go for a rate cut:

1. Slowing Inflation – Inflation in the UK has been cooling, with the core Consumer Price Index (CPI) falling to 3.2% in December. This suggests that price pressures are easing, giving the BoE more room to lower rates without fueling further inflation.
2. Concerns About Job Growth – The UK labor market has shown signs of weakness, with businesses slowing down hiring. Employers are also unhappy with increased National Insurance (NI) contributions, which could further dampen job growth.

A rate cut typically makes borrowing cheaper, encouraging spending and investment. However, it also tends to weaken a currency, which is why the Pound has been under pressure ahead of the BoE’s decision.

What’s Next for the Pound?

Short-Term Outlook

In the short term, the Pound’s movement will depend largely on:

• The BoE’s final decision on interest rates
• The market’s reaction to US economic data
• Any new geopolitical developments that could influence risk sentiment

If the BoE cuts rates as expected, the Pound may remain under pressure. However, if the central bank surprises markets by keeping rates steady, we could see a rebound in the currency.

Long-Term Factors to Watch

Looking ahead, several factors will determine how the Pound performs over the coming months:

• UK Economic Growth – If economic activity picks up, it could support the Pound. However, weak growth or recession fears may lead to further declines.
• US Federal Reserve Policy – Any changes in US interest rates will impact the Dollar, which in turn affects the GBP/USD exchange rate.

GBPUSD is moving in a downtrend channel

• Global Market Sentiment – If investors continue to favor safe-haven assets, the Pound could struggle. On the other hand, a shift toward riskier investments might help the currency recover.

Final Thoughts

The British Pound is facing significant pressure due to a combination of global uncertainties, trade tensions, and expectations of a BoE rate cut. While the central bank’s decision will be a major market mover, other factors like US economic data and investor sentiment will also play a role.

For now, traders and investors will be keeping a close eye on economic developments to gauge where the Pound is headed next. Whether it recovers or continues to slide will depend on how these key events unfold.