Pound Sterling Gains Against US Dollar as Trump’s Tariff Hike Weighs on US Economy

Pound Sterling Gains Against US Dollar as Trump’s Tariff Hike Weighs on US Economy

GBP/USD Climbs on Weak US Economic Signals and Tariff Concerns

The Pound Sterling (GBP) continued its bullish trajectory, rising to 1.3580 against the US Dollar (USD) in Thursday’s European session. This momentum follows a dramatic USD sell-off prompted by disappointing US economic data and heightened trade policy risks under the Trump administration.

Trump Tariffs and Weak Labor Data Hit the Greenback

On Wednesday, President Donald Trump doubled tariffs on steel and aluminum to 50%, intensifying trade tensions and spooking markets. Meanwhile, the ADP Employment Change report revealed just 37,000 jobs added in May—far below the expected 115,000 and the lowest figure since January 2021. This raised serious doubts about the resilience of the US labor market.

The US Dollar Index (DXY) slid to a six-week low at 98.60, reflecting broader weakness across the currency basket.

Services and Manufacturing Slump Points to Broader Economic Risks

Further adding pressure, the ISM Services PMI unexpectedly showed contraction in the US services sector, which makes up two-thirds of the national economy. The ISM Manufacturing PMI also indicated a sharper-than-expected decline in factory activity.

Bank of England Remains Cautious but Supportive for GBP

BoE Governor Andrew Bailey reiterated a "gradual and cautious" approach to monetary policy, providing additional stability for the GBP amid market volatility. With the UK-US yield spread moderately widening, the fundamental outlook favors further GBP strength.

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