The British pound extended losses against the US dollar, with GBP/USD slipping toward 1.2350, as renewed trade tensions following Donald Trump’s tariff proposals triggered a risk-off mood across financial markets. Investors shifted away from risk-sensitive assets, favoring the US dollar, which remained firm despite mixed economic signals.
Market sentiment soured after Trump hinted at a fresh wave of tariffs, reigniting fears of global trade disruptions. The uncertainty weighed on equities and high-beta currencies, including the pound, as traders braced for potential economic fallout. The shift toward safe-haven assets further strengthened the dollar, limiting GBP/USD’s ability to recover.
Meanwhile, the US dollar held steady, supported by elevated Treasury yields and expectations that the Federal Reserve will keep rates high for an extended period. While recent US data pointed to slower economic growth, investors remained cautious about the Fed’s policy stance, keeping the greenback in demand.
The Bank of England’s cautious tone has added to the pound’s struggles, with policymakers signaling concerns over economic weakness despite lingering inflationary pressures. With traders expecting the BoE to maintain a dovish stance, the policy divergence with the Fed has kept the pound under pressure.
Looking ahead, market participants will focus on US inflation data and further updates on Trump’s trade policies. A higher-than-expected inflation reading could reinforce Fed hawkishness, further supporting the dollar, while any signs of easing trade tensions may provide some relief for risk assets.
For now, GBP/USD remains vulnerable, with 1.2350 acting as a key support level. If bearish momentum persists, the pair could face further downside, especially if risk sentiment continues to deteriorate.
