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GBP/USD briefly reached 1.3200 for the first time in six months but faced rejection before settling back. The Pound Sterling remains bullish due to a weakening US Dollar amid changing market sentiments.
Limited UK economic data is expected this week, with the US Nonfarm Payrolls (NFP) report influencing market movements. Analysts predict the report will reflect the tariffs’ economic impact.
Us Services Sector Loses Momentum
The US ISM Services Purchasing Managers Index (PMI) fell to a nine-month low of 50.8, indicating dwindling business activity and consumer confidence. Recovery may be slow in the post-tariff environment.
A 10% tariff on all imports will commence on April 5, with reciprocal tariffs starting April 9. Fitch Ratings anticipates a downturn in US economic growth due to these measures.
The GBP/USD pair found support from the weaker dollar but retreated to the 1.3100 area. Technically, the pair has broken out of its recent range, remaining above the 200-day Exponential Moving Average at 1.2735.
Pound Sterling’s value is influenced by the Bank of England’s monetary policies and critical economic data releases. Key factors include GDP growth, manufacturing PMIs, and the trade balance.
Market Sentiment And Policy Shifts
In summary, while GBP/USD has temporarily pulled back from 1.3200, its bullish trend remains intact as market participants await vital US economic indicators and developments regarding tariffs.
With GBP/USD having made a short-lived move above 1.3200 – the first time in half a year – only to be knocked back swiftly, it might be tempting to view this as a failed breakout. However, the pullback that followed fell into a more methodical pace rather than a panicked retreat, suggesting broader undercurrents are still working in favour of Sterling. The recent advance wasn’t based on UK strength alone, but rather it was helped along by a Dollar that is losing its shine. When we’ve got the world’s largest economy showing cracks, particularly through its service sector, even modest resilience in the UK can have outsized effects.
The ISM services print, dragging down to 50.8, speaks volumes. While it’s still holding above 50 – the traditional line that separates expansion from contraction – the direction is unmistakable. Lower services output isn’t simply a blip; it connects back to consumer sentiment and hiring plans, both of which appear to be dampening. This context matters because services dominate the US economy. Once confidence within that segment slows, the pressure on forward-looking expectations grows. As reported figures slide, so too does the perceived need for aggressive rate hikes from the Federal Reserve.
Now, the tariffs are another thread to follow. These are not theoretical moves, or political threats, but dated and scheduled actions with enforceable consequences. Starting in early April, US-based importers will face immediate price pressures that filter downstream. The retaliatory tariffs announced by trade partners will, over time, weigh down US exporters. Fitch lacks optimism, and it’s not unjustified – growth projections are already facing downward revisions. For those of us watching momentum rather than sentiment, these policy shifts bring real costs, often with multi-month lag effects. Markets are wise to start pricing this in now, rather than waiting for downside surprises.
Sterling, then, is rising not because of an overwhelming surge in domestic data – there hasn’t been much to digest from the UK this week – but because Dollar weakness is reordering flows. We’ve broken higher from a tightly-wound trading range, and while the initial run stalled, price is now holding above not just basic support, but more enduring moving averages. The 200-day EMA, sitting nearer 1.2735, now forms a technical floor that traders will use as a long-term bias indicator. Staying well above it has bullish implications.
As for positioning in the coming days, attention turns entirely to incoming US data. NFP looms, and the market still treats this as a compass for monetary policy. When payrolls soften – and there’s a real risk this one will – the dovish tilt intensifies. If job creation misses forecasts materially, it strengthens the case for a more patient Fed, especially in light of slowing ISM indicators. We’ve got to model this with precision. There’s no benefit to reacting after the release; stance must be updated in advance according to expectations.
The pair seems to be carving out higher lows, rather than peaking. This kind of price behaviour usually brings follow-through, provided no disruptive surprises hit from the UK side. Regardless, we’d be unwise to ignore the wider macro context which continues to disadvantage the Dollar. The stage is now reliant on how policymakers will describe the trade impact in the quarter ahead – both the Bank of England in response to domestic implications and the Fed as it reassesses.
Directional conviction remains upward-facing, mapped through both fundamentals and momentum cues. With event risk concentrated on the US front, risk management should address short-term volatility likely to emerge around the release windows. Repricing is unlikely to be gradual around these events. For trend-followers, patience could pay off, but taking blind exposures without hedging into NFP wouldn’t match current uncertainty.
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