Pound to Dollar Forecast: GBP/USD Whipsaws on Tariff Chaos

February 4, 2025 - Written by Frank Davies

STORY LINK Pound to Dollar Forecast: GBP/USD Whipsaws on Tariff Chaos

The Pound US Dollar exchange rate rebounded strongly on Monday, testing highs of $1.2437 during the Asian session on Tuesday.

At the time of writing, GBP/USD was trading at approximately $1.2412, down roughly 0.19% from the start of Tuesday’s session.

GBPUSD had slumped on Monday as fears over a global trade war following Donald Trump’s newly announced tariffs rattle markets.

On Monday, the US Dollar (USD) surged against most of its major counterparts, gaining more than 1% against several key currencies.

The rise in the USD was triggered by President Donald Trump's new tariffs on Mexico, Canada, and China, which were announced over the weekend.

Concerns about a potential global trade war sent shockwaves through the markets at the beginning of the week, leading investors to seek safe-haven assets.

This flight to safety significantly strengthened the 'Greenback' on Monday.

On Monday, despite a generally cautious market mood and the Pounds (GBP) increasing sensitivity to risk, the currency managed to gain strength against most of its counterparts.

The GBP received a boost after US President Donald Trump announced new global tariffs on Saturday but indicated a more lenient approach toward the UK.

Speaking in the UK, Trump explained ‘The UK is out of line but I’m sure that one, I think that one can be worked out,’ which helped to support GBP exchange rates.

However, the UK's finalised manufacturing PMI for January remained below 50 on Monday, signalling ongoing contraction in the sector, which likely capped any further gains for the Pound.

Looking ahead, the main driver of movement for the Pound US Dollar exchange rate on Tuesday will likely be the release of the US’s latest labor data.

If the December JOLT job opening survey aligns with market expectations and confirms a slowdown in new US job creations at the end of last year, USD exchange rates could be undermined.

As for the Pound, Tuesday's economic calendar has no UK data releases, which means Sterling may struggle to find a clear direction as the week progresses.

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TAGS: Pound Dollar Forecasts