**GBP/USD Slumps to 1.3550 as Tariff Threat and Weak UK Outlook Pressure Sterling**
*By TradingNews.com Staff (Original author credit: TradingNews.com)*
The British pound continued its recent slide on the back of intensifying global trade tensions and a lackluster UK economic outlook, with the GBP/USD pair falling sharply to a low of 1.3550 in today’s European session. Mounting concerns over potential new trade tariffs and disappointing domestic data have combined to put the sterling under heavy downward pressure, sparking renewed caution among forex traders and investors.
### A String of Headwinds for Sterling
In recent sessions, the pound has faced a barrage of negative catalysts which have amplified bearish sentiment in forex markets:
– **Fresh Tariff Threats:** Renewed speculation surfaced this week that the United States may consider imposing additional tariffs on select UK exports, in response to ongoing disputes over digital services taxes and broader trade imbalances. While no final decisions have been announced, the very prospect has soured sentiment surrounding the pound.
– **Weak UK Data:** Recent UK economic releases have taken a disappointing turn, with the latest GDP growth and manufacturing output reports falling short of expectations. At a time when global growth uncertainty remains high, the UK’s sluggish recovery has cast a shadow over sterling’s near-term prospects.
– **Political Uncertainty:** The fallout from ongoing Brexit negotiations—as well as political squabbling over Northern Ireland trade protocols—continues to muddy the outlook for UK assets. Investors are increasingly wary of headline risk emanating from Westminster and Brussels.
– **Dovish Bank of England:** Comments from several Bank of England policymakers have signaled caution regarding the pace of future rate hikes, further weighing on the sterling as traders temper their monetary tightening expectations.
### Sharp Decline in GBP/USD
Against this backdrop, the GBP/USD pair has experienced heavy selling since the start of the week.
– **Key Technical Breakdown:** The move below the psychologically significant 1.3600 handle triggered a wave of stop-loss selling, pushing the pair toward 1.3550—a level not seen since late last year.
– **Forex Flow Reaction:** Traders report healthy flows as short-term portfolios and some real money investors lighten sterling exposure amid deteriorating risk appetite.
– **Broader Dollar Strength:** In addition to domestic factors, a broadly bid US dollar has also contributed to sterling’s underperformance. Better-than-expected US economic releases and wagers on sustained Federal Reserve hawkishness have kept the greenback on the front foot.
### Macroeconomic Context and Market Reaction
#### US Tariff Concerns
Market suspicion that the US government may soon enact new tariffs on UK imports centers around several flashpoints, including:
– **Digital Services Tax:** US officials argue the UK’s digital services tax unfairly targets big American tech companies, and have threatened retaliatory measures.
– **Steel and Aluminum Quotas:** Washington is reportedly considering whether to review quotas imposed on British steel and aluminum, raising uncertainty for key UK manufacturing sectors.
The increasing likelihood—or even the *threat*—of additional trade barriers has proven enough to dampen investor sentiment toward the pound. The UK’s heavy reliance on export sectors for post-pandemic economic recovery means traders are on alert for any headlines indicating an escalation of tariff rhetoric.
#### UK Economic Underperformance
Recent high-frequency data out of the UK paints a modestly worrying picture:
– **GDP Growth Miss:** The latest monthly GDP reading showed output expanding by just 0.1% month-over-month, missing consensus forecasts for a 0.3% increase.
– **Weak Manufacturing Output:** Official figures indicated that manufacturing production contracted by 0.5%—worse than expected and signaling potential headwinds for the crucial industrial sector.
– **Soft Retail Sales:** Consumer spending, an engine of the UK economy, also fell short of expectations, reinforcing concerns that rising inflation and energy costs are biting into household budgets.
This run of weaker data raises the probability that growth momentum
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