Pound US Dollar (GBP/USD) Exchange Rate Firms as Trump Comments Subdue USD

January 28, 2025 - Written by David Woodsmith

STORY LINK Pound US Dollar (GBP/USD) Exchange Rate Firms as Trump Comments Subdue USD

The Pound Sterling gained ground against the US Dollar on Monday, driven by easing concerns over tariffs and the prospect of lower interest rates in the United States.

At the time of writing, GBP/USD exchange rate traded at $1.2506, up 0.2% on the day.

On Monday morning, the British Pound (GBP) saw a slight uptick, though the exact reason behind the movement remains uncertain.

GBP investors might have been cheered by reports suggesting that UK Chancellor Rachel Reeves is contemplating the introduction of new pro-growth policies to rejuvenate the country's struggling economy.

Speculation is rife that Reeves could green-light a contentious third runway at Heathrow Airport, as well as consider joining a tariff-free trade agreement with the European Union.

Meanwhile, the US Dollar (USD) remained subdued as investors continued to process Donald Trump’s recent comments about interest rates. The US President suggested he might pressure the Federal Reserve to lower rates.

During his address at the World Economic Forum in Davos on Thursday, Trump stated:

'With oil prices going down, I'll demand that interest rates drop immediately, and likewise, they should be dropping all over the world.'

These remarks contributed to the USD's muted performance. Additionally, the recent flare-up of trade tensions between the US and Colombia seemed to dampen the American currency further.

Trump had threatened to impose 25% tariffs on Colombia if they did not accept deported migrants transported by US military planes. However, the two countries reached an agreement, alleviating concerns about potential tariffs.

Looking forward, some US data on Tuesday could impact the ‘Greenback’.

Markets expect to see a recovery in durable goods orders in December, following November’s slump, which could lend USD support.

An expected uptick in US consumer confidence in January could also give the ‘Greenback’ a boost.

However, USD movement may be limited to Wednesday evening before the Federal Reserve’s interest rate decision. The decision itself could potentially see USD surge if Fed Chair Jerome Powell defies Donald Trump by arguing that US interest rates should remain restrictive.

Meanwhile, movement in the Pound may be tied to risk appetite through the next few days due to an ongoing lack of UK economic data.

International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.

TAGS: Pound Dollar Forecasts