Original Article by TradingNews.com
Title: GBP/USD Price Forecast Falls to 1.34 as Dollar Rises in Trump’s China Shift
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The British pound sterling (GBP) has come under intense pressure against the US dollar (USD) as political developments in the United States and global economic shifts increasingly favor the greenback. The GBP/USD pair has dropped significantly, plummeting to the 1.34 level as a stronger dollar continues to gain momentum amid renewed tensions between Washington and Beijing.
The forex market’s reaction has been swift. The pound-dollar exchange rate, which had been making gains earlier in the year, now finds itself sliding toward multi-month lows. While the UK faces its own internal economic and political fluctuations, the dominant factor influencing the currency pair remains the rising strength of the US dollar, triggered mainly by shifts in international politics and investor sentiment.
Key Drivers Behind the GBP/USD Decline
Several interlinked factors have pushed GBP/USD into bearish territory. The most prominent among them include the following:
• Strengthening of the US Dollar:
Following a shift in the US administration’s trade policy under former President Donald Trump, the dollar has seen renewed bullish sentiment. The administration’s more combative stance toward China has created an “America-first” investment environment, encouraging capital inflows into the US.
• Safe-Haven Appeal:
Risk-off sentiment in global markets, driven by escalating geopolitical tensions and uncertain economic partnerships, has led investors to favor traditional safe-haven assets. The US dollar, backed by deep liquidity and economic weight, remains a top beneficiary.
• UK Economic Concerns:
The British economy has been displaying signs of a slowdown. Weak manufacturing activity, reduced consumer spending, and uncertainty surrounding post-Brexit trade agreements have created downward pressure on the pound.
• Dovish Bank of England (BoE):
The UK’s central bank has signaled caution in its monetary policy approach. With inflation appearing to stabilize but growth lagging behind expectations, the BoE remains hesitant in pursuing aggressive rate hikes, unlike its US counterpart.
The U.S. Dollar’s Renewed Dominance
Donald Trump’s influence might no longer be active in office, but the economic legacy of his confrontational stance on foreign policy continues to reverberate. His tariffs, trade renegotiations, and rhetoric around reducing dependency on China laid the groundwork for resurgent nationalism in economic policymaking.
While President Biden has adjusted the approach, the strategic pivot away from reliance on Chinese manufacturing and supply chains persists. This long-term policy has spurred confidence in US domestic industries, enticing investors to focus heavily on dollar-denominated assets.
In forex markets:
• The US Dollar Index (DXY), which measures the greenback against a basket of global currencies, has steadily climbed.
• Treasury yields are rising, reflecting expectations of continued economic resilience in the United States.
• Hawkish signals from the Federal Reserve indicate a sustained tightening cycle, which usually supports currency appreciation.
Considering these macroeconomic shifts, the dollar’s momentum is expected to continue in the near to medium term unless interrupted by a marked change in economic data or global political developments.
Pound Under Pressure: Domestic and Global Challenges
The United Kingdom, in contrast, is facing structural economic headwinds that complicate any recovery in the pound’s valuation. From inflation and labor shortages to reduced business investment, the resistance to upward movement is rooted in both cyclical and systemic weaknesses.
Current UK-specific factors impacting the pound include:
• GDP Growth Concerns:
Latest data shows that the UK economy is teetering on the brink of stagnation, with quarterly growth readings barely in positive territory.
• Sluggish Industrial Output:
A decline in manufacturing and construction has become more apparent, particularly in the wake of supply chain disruptions and rising input costs.
• Brexit Fallout:
While the UK officially left the European Union several years ago, businesses are still adjusting to trade barriers and
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