China imposed 125% tariffs on US goods in response to the US raising duties to 145%. This escalation in the trade war has contributed to GBP/USD rising to 1.3067, an increase of 0.77%.
US consumer sentiment fell sharply to 50.8, with inflation expectations rising to 6.7% for one year. Meanwhile, UK GDP grew by 0.5% in February, surpassing forecasts and supporting the Pound.
Trade War Impact On Currency
If GBP/USD falls below 1.30, it may find support at 1.2968, while further declines could target 1.2900 and the 200-day Simple Moving Average at 1.2815. The British Pound has shown notable strength against various currencies this week.
The sharp response from Beijing, slapping a 125% tariff on a broad range of American imports, wasn’t entirely unexpected. Still, the degree of escalation – especially following Washington’s decision to raise duties to 145% – added fuel to an already tense economic stand-off. The direct consequence has been a marked bid for sterling, with the GBP/USD exchange rate lifting to 1.3067, a rise of 0.77% by the close of the session. It’s not just about relative values anymore – it’s about where capital finds refuge when global trade tensions flare this intensely.
The tumble in US consumer sentiment to 50.8 – a level more in line with recession-era readings – tells us more than any single data print could. Confidence continues to unravel across segments of the American population. When paired with the jump in one-year inflation expectations to 6.7%, there’s clear concern that the Federal Reserve may be stuck between a weakening economy and persistent price pressures. That kind of outlook tends to weaken the greenback, especially when the response by central bank policymakers isn’t immediate or coordinated.
Across the Atlantic, there was robust data from Britain. Monthly GDP growth of 0.5% in February came in well ahead of projections. While that print alone doesn’t change long-term expectations, it adds weight to the recent pattern we’ve seen – stronger economic signals benefitting the pound, particularly in response to weaker gears shifting elsewhere. That’s reflected not just in the cable pair, but also in how sterling has behaved against a basket of G7 currencies. It’s been firm.
Market Outlook And Strategies
Looking down from current levels, the short-term chart suggests markets could be preparing for a pullback. A drop below 1.30 may be met by buying interest around 1.2968, a mark that’s offered protection during prior pullbacks. Should that give way, next in view is 1.2900, and then the longer-term anchor of the 200-day simple moving average at 1.2815. That particular zone has framed downside reversal levels over the past six months, so it’s worth watching.
For our approach, it’s about context and levels. Sentiment and macro trends, yes – but everything leads back to how liquidity sets up near key technical prices. If the US data cycle continues its slide, and inflation expectations stay high, the dollar’s resilience will be tested further, especially if yields begin to contract. Talk of policy divergence is already circulating again.
On the British side, the focus shifts to how incoming PMI numbers and labour data perform next week. Better-than-expected prints could keep demand elevated, particularly if US instability persists. The key is not to anticipate movement blindly, but to gauge where buyers and sellers are willing to step in. Levels like 1.2968 and 1.2815 aren’t just numbers – they’re psychological barriers too, and those often provide some of the clearest indications of where momentum might stall or switch.
As we watch markets position around tariffs, weaker sentiment in the US, and stronger-than-expected UK statistics, it’s better to stay alert for high-reward setups rather than reacting emotionally to headlines. The recent rise in volatility – much of it politically driven – offers opportunities, but only if entries and exits are placed with technical logic, not guesswork.
