GBP/USD Forecast: Pound Price Softens as Tariff Reprieve Boosts Dollar

May 27, 2025 - Written by Ben Hughes

STORY LINK GBP/USD Forecast: Pound Price Softens as Tariff Reprieve Boosts Dollar

The Pound US Dollar (GBP/USD) exchange rate softened on Tuesday, as USD investors welcomed Donald Trump’s delay of tariffs on the EU.

At the time of writing, GBP/USD traded at $1.3535, down over 0.2% since the European session started.

The Pound (GBP) attempted to find its footing on Tuesday but struggled to make meaningful gains, as downbeat UK retail data counteracted a string of encouraging trade developments.

A fresh blow came from the Confederation of British Industry (CBI), whose latest distributive trades survey – a measure of retail sales – slumped to -27 in May, sharply down from -8 the previous month and well below expectations of -18. The disappointing figures suggested a more fragile consumer backdrop than anticipated, dampening investor appetite for Sterling and curbing its upside against stronger currencies.

This weaker economic reading came despite otherwise constructive news on the trade front. Reports that Toyota may relocate some of its GR Corolla sports car production to the UK were seen as a tentative endorsement of Britain’s appeal as a transatlantic manufacturing hub. Analysts were quick to point out that the UK’s growing list of trade agreements, including recent progress with both the US and India, could enhance its role as a key export platform.

The US Dollar (USD) found some relief on Tuesday, clawing back ground after a sharp sell-off last week fuelled by concerns over the health of the US economy and its growing debt burden.

Investors took some comfort from the news that Donald Trump has decided to delay a planned wave of steep tariffs on EU imports. The 50% levy – originally set to take effect on 1 June – has been pushed back to 9 July following a call between Trump and European Commission President Ursula von der Leyen.


Markets were cheered by this sign that US trade talks may be progressing, amid previous fears they had slowed or stalled. This helped the Dollar regain some poise.

However, while the tariff pause was seen as a positive for the domestic economy, it also lifted broader market sentiment – encouraging a modest risk-on mood that tempered demand for the safe-haven ‘Greenback’.

Looking ahead, the Pound to US Dollar exchange rate is likely to take its cues from the release of the Federal Reserve’s latest meeting minutes.

Investors will be poring over the details for clues on whether the Fed intends to stick to its cautious, data-dependent stance. If policymakers signal that they’re willing to hold off on rate cuts until the inflationary impact of potential tariffs becomes clearer, the US Dollar may find fresh momentum.

Conversely, any indication that Fed officials are growing increasingly concerned about stagnating growth or leaning towards earlier policy easing could sap support for the ‘Greenback’.

With few major data releases on the UK or US calendars this week, broader market mood may also play a role. A more upbeat global risk tone could give Sterling a leg-up, while denting appetite for the safer US Dollar.

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TAGS: Pound Dollar Forecasts