GBP/USD breaks below 1.3300 as US Dollar appreciates on a potential US-China trade deal
- GBP/USD edges lower after a Bloomberg report indicated China may suspend its 125% tariff on select US imports.
- The Greenback's momentum was tempered as US Initial Jobless Claims rose to 222,000, slightly exceeding expectations.
- UK sentiment weakened, with GfK Consumer Confidence dropping to -23 in April—its lowest level since November 2023.
GBP/USD is retracing its recent gains, hovering around 1.3290 during Friday’s Asian session. The pullback comes as the US Dollar (USD) strengthens, bolstered by a Bloomberg report suggesting China may suspend its 125% tariff on select US imports, including medical equipment, ethane, and aircraft leasing.
Sources familiar with the matter noted that officials are particularly evaluating a waiver on tariffs for plane leases. China's Ministry of Finance and the General Administration of Customs have yet to comment. Further supporting the Greenback is optimism surrounding US trade negotiations. Reuters reports progress in preliminary talks with key Asian allies, including South Korea and Japan.
The US Dollar Index (DXY), which tracks the USD against six major currencies, is recovering previous losses, trading near 99.80. However, the Greenback faced headwinds following mixed labor data. The US Department of Labor suggested Initial Jobless Claims rose to 222,000 for the week ending April 19—slightly above expectations—while Continuing Claims declined by 37,000 to 1.841 million for the week ending April 12.
In the United Kingdom (UK), GfK Consumer Confidence slipped to -23 in April—its lowest level since November 2023—amid rising living costs and growing global trade concerns, missing forecasts of -22. Traders now await UK Retail Sales data and the final reading of US Michigan Consumer Sentiment later in the North American session.
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.