- The GBP/USD outlook shows improving risk appetite after Trump paused reciprocal tariffs.
- Trump imposed a 125% tariff on China, worsening its trade relations with the US.
- Britain will strive for an economic partnership with the US.
The GBP/USD outlook shows improving risk appetite after Trump paused reciprocal tariffs on most countries. As a result, traders have moved back to riskier currencies like the pound and dumped safer ones like the yen. However, the escalating trade war between China and the US is keeping a lid on gains.
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The pound initially collapsed on Wednesday after Trump’s reciprocal tariffs ignited a flight to safe-haven assets. A baseline tariff of 10% on most of the US’s trading partners started on Wednesday. As a result, experts were predicting higher chances of a global recession that caused panic among traders. Consequently, the pound collapsed as demand for safe-haven assets increased.
However, the trend suddenly changed when Trump announced a 90-day pause on reciprocal tariffs. The pause revealed that the aggressive policy move was a negotiating tactic. Now, most countries are ready to negotiate better trading deals.
However, dark clouds are still hanging over the global economy. The trade war between China and the US worsened after Trump imposed a 125% tariff on the country. China responded with an 84% tariff on US goods. Risk appetite will remain low as long as this conflict continues.
Elsewhere, the UK Prime Minister has said Britain will strive for an economic partnership with the US. Nevertheless, tariffs have dimmed the outlook for the economy, increasing BoE rate cut bets.
GBP/USD key events today
- US core CPI m/m
- US CPI m/m
- US CPI y/y
- US unemployment claims
GBP/USD technical outlook: Bulls meet solid resistance zone near the 0.382 Fib
On the technical side, the GBP/USD price has rebounded after meeting the 1.2700 key support level. Bulls are attempting to take control by pushing the price above the 30-SMA resistance. However, they face a strong resistance zone comprising the 1.2880 key level and the 0.382 Fib retracement level.
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A strong close above this zone will indicate a bullish sentiment shift, clearing the path for GBP/USD to retest the 1.3200 resistance level. On the other hand, if bulls fail to close above the resistance zone, the price will bounce lower to retest the 1.2700. A break below this support will make a lower low, strengthening the bearish bias.
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