GBP/USD rocketed this week to multi-month highs. It shot through that 1.3500 barrier, hitting its highest levels since February 2022. The currency pair has made an impressive rally. Much of this surge can be attributed to a general weakness in the US Dollar, which is under pressure from a confluence of geo-political tensions and economic indicators.
The GBP/USD bullish reversal started on account of a weak US Dollar. It faltered and sank against the other major currencies. Market analysts point to President Donald Trump’s most recent heavy-handed threat of a 50% tariff on all European imports. This step is one of the most important forces behind today’s market downturn. The proposal – likened to a “straight 50% tariff” – has spooked markets, sapping GBP/USD of its bullish impetus.
The unexpectedly strong UK retail sales data for April added to the support behind the British Pound. This was compounded by tariff threats that continued to dangle over the industry. The new figures threw everyone for a loop with a much greater-than-expected growth. That would have strengthened confidence in the UK economy, and that buoyed GBP/USD. This positive retail sales data couldn’t have come at a better time. That great proactive move helped to blunt some of the protectionistic backlash that was making the tariff talks so toxic.
Indeed, as the week wore on, GBP/USD pulled back a bit from its highs, retesting the 1.3500 area. This correction serves to remind us of how the market often downdrafts in the aftermath of a major runup. That said, it hasn’t stopped the general wave of British Pound-bullishness. Traders are especially sensitive to global economic developments and policy shifts likely to affect currency movements.
Market analysts have consensus view for GBP/USD being bullish in near term. Yet, the path forward is almost entirely dependent on continued geopolitical tensions and key economic data releases. Investor sentiment will continue to be influenced significantly by the relationship between US economic policies and UK economic performance.