- The collapse of global stock markets, led by the US, has weakened the recent strong gains of the British Pound.
- Obviously, we have often noted that positive investor sentiment and the strength of global stock markets are factors in the upward gains of the GBP/USD pair.
- During last week’s volatile trading, the GBP/USD pair jumped towards the 1.3207 resistance level, its highest in six months, before quickly plummeting to the 1.2852 support level, its lowest in a month, before closing the week’s trading stable around 1.2898.
Weak Financial Markets Threaten Sterling Gains
According to Forex market trading, market confidence has continued to collapse since the announcement of US tariffs, with growing concerns about the future of the US and global economies. Stock markets also remained under pressure, with the UK’s FTSE 100 index falling by 2.9% to its lowest level in 12 weeks, while US futures fell by 1.7% before the open. Consequently, the decline in stock markets has hurt the British Pound, with the GBP/USD exchange rate falling from its 6-month high of 1.32 yesterday to trade near the psychological support level of 1.2800. The GBP/EUR exchange rate also fell to its lowest level in 10 weeks near 1.1800.
For its part, Bank of America pointed to global risks; US tariff increases exacerbate the risks of a global growth slowdown: Economists indicate that the recently announced US tariff increases could reduce global GDP growth by at least 50 basis points, with a potential impact of 100 to 150 basis points on US GDP growth, 100 basis points on China’s growth, and 40 to 60 basis points on Eurozone GDP growth. They added, “This comes amid a recent slowdown in US growth due to a decline in consumer spending.”
The loss of confidence in the global economy has been evident in energy markets, with benchmark oil prices falling to a three-year low.
The dollar has managed to regain some strength in global markets, but sentiment remains extremely fragile.
In general, the UK is vulnerable to volatility in the global economy and international asset markets, while expectations regarding Bank of England policy have shifted significantly. Financial markets are now pricing in just over an 85% chance of an interest rate cut in May, which is very close to pricing in three more rate cuts over the remainder of 2025.
Trading Tips:
The GBP/USD will not recover without a return to confidence in financial markets and a resurgence of investor risk.
Key Factors Influencing the GBP’s Performance
According to the economic calendar data, February’s GDP data will be the highlight for Britain, revealing the health of the economy before the imposition of tariffs. A slight increase is expected after January’s decline. On another front, Bank of England Deputy Governors Clare Lombardelli and Sarah Breeden are scheduled to deliver speeches on Wednesday, while the central bank will release the minutes of the March Financial Policy Committee meeting.
Also, we saw a further decline in UK bond yields, with the 10-year yield hitting a 16-week low of 4.40%. Likewise, Lower bond yields will have a positive impact on reducing debt interest payments. Therefore, uncertainty about trade policy will inevitably remain high in the short term.
According to reliable trading company platforms, the British Pound ended last week’s trading with a sharp decline against the Euro and the US Dollar after a historic $2 trillion loss in the US stock market. The GBP/EUR pair traded at 1.17647 and the GBP/USD pair at 1.28936, as fear dominated global markets with a strong demand for safe-haven assets. For example, the S&P 500 index recorded a 4.8% decline, its largest drop since 2020, and all global markets experienced widespread losses.
The UK’s FTSE 100 stock index saw further losses of 1.5% on Friday, reaching its lowest level in 11 weeks.
According to Forex market trading, the Yen and the Swiss Franc are traditional defensive currencies and have seen strong demand over the past 24 hours. The US Dollar recorded sharp losses before witnessing a limited rebound on Friday, while the decline in high-risk assets undermined the British Pound.
Technical Analysis for the GBP/USD pair today:
Rapid movements in the GBP/USD pair are fuelling speculation about the future direction of the GBP/USD pair, based on the performance on the daily chart. Technically, a move towards the 1.2800 psychological support level would threaten the recent upward shift. Technically, bulls will have no chance of regaining control of the trend without a resurgence above the 1.3050 resistance level. Furthermore, the pair will not have any chance of rising without a return of market confidence and increased risk-taking by investors.
Ready to trade our daily Forex GBP/USD analysis? We’ve made this UK forex brokers list for you to check out.