The British Pound extended its advance against the US Dollar in early Asian trading on Monday, with the GBP/USD pair climbing toward the 1.3350 mark. The rally is largely fueled by continued weakness in the US Dollar, as markets grow increasingly concerned that President Donald Trump’s economic policies may push the US economy toward recession.
Sentiment surrounding the Pound received a further boost following the first conversation between UK Prime Minister Keir Starmer and President Trump since the latter imposed tariffs on UK imports. The two leaders reportedly held “ongoing and productive” discussions on trade. A Downing Street spokesperson said Starmer reaffirmed his commitment to “free and open trade” while stressing the need to safeguard the UK’s national interest.
Prime Minister Starmer is currently pushing for a new trade agreement with Washington after Trump slapped 10% tariffs on a broad range of UK goods, and even steeper duties—25%—on automobiles, steel, and aluminum. Despite the tensions, hopes for progress in negotiations have supported the Pound in the short term.
However, the pair’s upside could face headwinds from the US Federal Reserve’s latest signals. Fed Chair Jerome Powell acknowledged last week that rising tariffs risk stoking inflation while threatening economic growth, creating complications for future interest rate moves. Powell emphasized that the Fed is currently in a position to “wait for greater clarity” before making any policy shifts, signaling a cautious yet vigilant stance.
While the near-term outlook for GBP/USD remains constructive amid ongoing trade optimism and broad USD weakness, market participants remain alert to any shifts in Fed policy rhetoric or further developments in the US-UK trade dialogue.
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