Pound to Dollar FX Outlook: GBP/USD Gains on Trump Tariff Uncertainty

March 26, 2025 - Written by Frank Davies

STORY LINK Pound to Dollar FX Outlook: GBP/USD Gains on Trump Tariff Uncertainty

The Pound-to-Dollar advanced on Tuesday following reports suggesting US President Donald Trump may take a more gradual approach to introducing new tariffs.

At the time of writing, the Pound US Dollar exchange rate (GBP/USD) was trading at around $1.2948, up approximately 0.2% from Tuesday’s opening levels.

The US Dollar (USD) faced headwinds on Tuesday as investors reacted to a report from the Financial Times suggesting the White House may take a two-step approach to implementing future tariffs.

According to the report, Trump’s administration is considering an initial round of emergency duties while conducting in-depth investigations into key trading partners. This strategy is expected to generate immediate revenue for potential tax cuts while establishing a more structured legal foundation for long-term tariffs.

The market viewed this approach as a potential softening of Trump’s aggressive tariff plans, leading to a dip in USD exchange rates.

Further weighing on the US Dollar was the latest US consumer confidence reading, which revealed a larger-than-expected decline. Given that weak consumer sentiment has been fuelling US recession fears, this drop renewed concerns over the country’s economic trajectory.

The Pound (GBP) remained rangebound on Tuesday as investors exercised caution ahead of Chancellor Rachel Reeves’s Spring Statement on Wednesday.

The statement will include updated economic forecasts from the Office for Budget Responsibility (OBR) and outline the government’s fiscal strategy. Reeves is expected to focus on reassuring financial markets by highlighting the government’s commitment to fiscal responsibility.

However, speculation over new spending cuts is generating uncertainty. If Reeves announces significant reductions in public spending that investors believe could hinder UK economic growth, it could place pressure on Sterling.

Looking ahead, movement in the Pound to US Dollar exchange rate on Wednesday is likely to be driven by the UK’s Spring Statement.

Before Reeves delivers her update, Sterling sentiment may also be influenced by the UK’s latest consumer price index.

Analysts forecast that inflation slowed slightly in February, which it could add to speculation that the Bank of England (BoE) may opt for another interest rate cut in May, potentially weighing on the Pound.

For USD investors, attention will turn to the latest US durable goods orders figures. Will a sharp decline in orders growth last month apply additional pressure to the US Dollar?

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TAGS: Pound Dollar Forecasts