- The Pound Sterling is experiencing a retracement against the US Dollar, approaching the 1.3350 level, as it demonstrates broad-based underperformance.
- The US economy experienced a contraction of 0.3% during the first quarter of the year, spanning January to March.
- Bank of England’s Greene anticipates that President Trump’s tariff policies will exert a net disinflationary effect on the UK economy.
The Pound Sterling (GBP) is extending its corrective move, trading near 1.3350 against the US Dollar (USD) during Wednesday’s North American trading session. This represents a pullback from the fresh three-year high of 1.3445 reached on Tuesday. The GBP/USD pair is currently trading near its intraday low, even as the US Dollar (USD) relinquished a significant portion of its intraday gains following the release of key United States (US) economic data. This suggests a relative weakness in the Pound Sterling compared to its US counterpart.
Recent US economic data reveals a contraction in the economy during the first quarter, coupled with a continued sluggishness in job growth throughout April. These figures have prompted concerns about the overall health of the US economy and its potential impact on monetary policy.
The US Bureau of Economic Analysis (BEA) reported that the Gross Domestic Product (GDP) decreased by 0.3% on an annualized basis. This contrasts sharply with economists’ expectations of a moderate 0.4% expansion. In the final quarter of 2024, the US economy demonstrated robust growth at a rate of 2.4%. The current contraction marks the first instance of negative GDP growth since the first quarter of 2022, raising concerns about a potential economic slowdown.
Concurrently, the US ADP National Employment Report indicated that the private sector added 62,000 new jobs in April. This figure falls considerably short of economists’ projections, which anticipated approximately 155,000 new jobs, and is significantly lower than the 155,000 jobs added in March.
The combination of a significant GDP contraction and subdued job growth suggests a growing fragility within the US economy, particularly in light of the substantial tariffs imposed by US President Donald Trump earlier in the month. These tariffs are perceived to be creating headwinds for economic expansion.
President Trump’s imposition of sweeping additional tariffs on key trading partners has contributed to heightened global economic uncertainty, including within the United States. While, in theory, protectionist policies should incentivize domestic industries to increase production to compensate for reduced imports, the unpredictable nature of announcements from the White House regarding import duties has led many businesses to postpone or reconsider their expansion plans.
The cooling labor market and the contraction in GDP are fueling market expectations that the Federal Reserve (Fed) may consider reducing interest rates at its June policy meeting. According to the CME FedWatch tool, the probability of a rate cut in June currently stands at 62.5%. For the upcoming May policy meeting, market participants have almost fully priced in the expectation that the Fed will maintain interest rates unchanged within the current target range of 4.25%-4.50%.
Federal Reserve officials have consistently indicated that interest rates are likely to remain at their present levels until greater clarity emerges regarding the potential impact of President Donald Trump’s new economic policies on the overall economic outlook. On Tuesday, President Trump reiterated his criticism of Fed Chair Jerome Powell for not implementing interest rate cuts, coinciding with the commemoration of his first 100 days in office. Although Trump did not explicitly name Powell, the context of his remarks and his previous interactions with the Fed Chair strongly suggested that Powell was the intended target.
“You’re not supposed to criticize the Fed, you’re supposed to let him do his own thing, but I know much more than he does about interest rates, believe me,” Trump said.
Daily digest market movers: Pound Sterling underperforms its peers
- The Pound Sterling is exhibiting underperformance relative to its major currency counterparts, with the exception of the Japanese Yen (JPY), during Wednesday’s European trading session. This weakness stems from increasing market confidence that the Bank of England (BoE) will implement a 25 basis point (bps) reduction in interest rates at its upcoming monetary policy meeting on May 8. These dovish expectations surrounding the BoE have intensified amid concerns that the new US tariff policy will alleviate inflationary pressures and negatively impact economic growth in the United Kingdom (UK).
- Bank of England policymaker Megan Greene stated that the potential trade war is likely to be “net disinflationary” for the UK economy. Greene made these remarks during a discussion with the Atlantic Council think tank on Friday. Furthermore, Greene cautioned about potential disruptions in the job market resulting from an increase in employers’ contributions to social security schemes, rising from 13.8% to 15%, which took effect this month.
- Last week, Bank of England Governor Andrew Bailey emphasized the importance of the central bank considering the potential risks associated with a trade war. “We do have to take very seriously the risk to growth,” Bailey stated on the sidelines of the International Monetary Fund’s (IMF) Spring Meetings in Washington.
- The UK economic calendar for this week is relatively light, lacking any major scheduled releases. Consequently, external factors, particularly developments related to global trade and monetary policy, are expected to be the primary drivers of the British currency’s performance.
- The Pound Sterling has maintained a degree of support against the US Dollar, primarily due to the persistent uncertainty surrounding the trade dispute between the United States and China. Washington is reportedly seeking to initiate trade discussions with China, given China’s significant reliance on exports to the US market. “I believe that it’s up to China to de-escalate, because they sell five times more to us than we sell to them,” Bessent said in an interview on CNBC’s Squawk Box on Monday. Meanwhile, Beijing has reiterated its commitment to defending its interests and national dignity in the face of the ongoing tariff war.
British Pound PRICE Today
The table below shows the percentage change of British Pound (GBP) against listed major currencies today. British Pound was the strongest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.16% | 0.47% | 0.36% | 0.11% | 0.25% | 0.42% | -0.01% | |
| EUR | -0.16% | 0.31% | 0.21% | -0.05% | 0.09% | 0.27% | -0.16% | |
| GBP | -0.47% | -0.31% | -0.11% | -0.35% | -0.22% | -0.05% | -0.48% | |
| JPY | -0.36% | -0.21% | 0.11% | -0.24% | -0.10% | 0.12% | -0.35% | |
| CAD | -0.11% | 0.05% | 0.35% | 0.24% | 0.14% | 0.31% | -0.12% | |
| AUD | -0.25% | -0.09% | 0.22% | 0.10% | -0.14% | 0.17% | -0.26% | |
| NZD | -0.42% | -0.27% | 0.05% | -0.12% | -0.31% | -0.17% | -0.43% | |
| CHF | 0.00% | 0.16% | 0.48% | 0.35% | 0.12% | 0.26% | 0.43% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).
