GBP/USD Extends Losses as Tariff Threats and Inflation Uncertainty Weigh on Markets

GBP/USD Extends Losses as Tariff Threats and Inflation Uncertainty Weigh on Markets

GBP/USD kicked off the new trading week with further losses, falling below the 1.3400 level on Monday and marking its seventh consecutive daily decline. The currency pair has now dropped over 2.5% from its July peak of 1.3788, driven by a combination of UK economic weakness and a stronger US Dollar.

50-Day EMA Breached for the First Time in a Month

The Pound has broken below the 50-day Exponential Moving Average (EMA) for the first time in over a month, signaling a potential shift in technical momentum. Investor risk appetite remains subdued due to geopolitical uncertainty, boosting the appeal of the safe-haven US Dollar.

Market Sentiment Pressured by US Tariff Threats

A new arbitrary August 1 deadline looms for a fresh wave of US tariffs, echoing past threats made by President Donald Trump. After delaying a previous set of retaliatory tariffs in April, the administration is now considering double-digit tariff hikes on close trade allies including South Korea, Japan, Canada, and Mexico.

This ongoing trade tension has reinforced global market caution, leading traders to seek refuge in the USD and selling off risk-sensitive assets like the British Pound.

Key Inflation Data on the Horizon

Markets are now bracing for upcoming inflation readings that could shape future monetary policy:

• US CPI (Consumer Price Index) figures for June are due Tuesday, expected to reflect early impacts of the imposed tariffs.
• UK CPI inflation is scheduled for early Wednesday and is anticipated to hold steady at previous levels.

The results of these data releases may influence expectations for interest rate paths from both the Federal Reserve and the Bank of England, potentially affecting the GBP/USD trend further.

Outlook

Until clarity emerges on both the tariff front and inflation trends, the GBP/USD pair may remain under pressure, especially if risk aversion continues to favor the Dollar.

Related Reading on Tredu.com:

• What Moves the Pound? Key Drivers of GBP/USD
• How US CPI Impacts the Forex Market
• Trading Safe-Haven Currencies During Market Volatility