Pound Sterling Slips to 1.3550 as US Tariff Uncertainty Weighs on Sentiment

Pound Sterling reverses against US Dollar, as US tariff uncertainty continues

The British Pound (GBP) lost ground against the US Dollar (USD) on Tuesday, pulling back to around 1.3550 during the European session after reaching a near three-year high of 1.3600 on Monday. The move comes amid ongoing market caution driven by persistent uncertainty over the United States’ trade policy direction and broader economic outlook.

US Policy Risks Keep Markets on Edge

The US Dollar has shown modest recovery following a recent downturn, with the US Dollar Index (DXY) rising back to 99.35 after finding support near 98.70. However, investors remain hesitant to fully back the Greenback as they assess the potential implications of President Donald Trump's postponed but still looming tariff threats, particularly those targeting the European Union.

Comments from Federal Reserve (Fed) official Neel Kashkari further added to investor unease. Kashkari warned of possible stagflation—a scenario marked by weak economic growth and high inflation—if the current US fiscal and trade trajectory persists. He cautioned that any change in monetary policy would be premature until there’s more clarity on inflation dynamics and economic performance.

UK Data Helps the Pound Stay Resilient

On the UK side, the economic backdrop appears more stable. A series of stronger-than-expected economic reports has prompted traders to unwind some of their dovish expectations for the Bank of England (BoE). This shift in outlook has provided some underlying support for the British Pound, limiting its downside against the USD.

What’s Next?

Looking ahead, attention turns to key US economic releases scheduled for later in the day, including April's Durable Goods Orders and May’s Consumer Confidence Index from the Conference Board. These reports are expected to offer more clues on the strength of the US economy and influence near-term moves in the GBP/USD pair.

Market participants will also continue monitoring developments around US trade policy and potential shifts in monetary strategy on both sides of the Atlantic.