**GBP/USD Collapses as Tariff Pressure, UK Recession Risk, and CPI Forecast Weigh on the Pound**
*By TradingNews.com Staff Writer*
The British pound (GBP) has come under intense selling pressure against the US dollar (USD), with the GBP/USD pair plunging to multi-month lows. The recent collapse has been accelerated by a storm of negative macroeconomic factors, including renewed tariff threats, growing fears of a UK recession, and sobering forecasts for the upcoming Consumer Price Index (CPI) release. These intertwined challenges are creating an environment of uncertainty and vulnerability for the pound, with implications that extend far beyond currency markets.
## 1. GBP/USD Technical Breakdown
The GBP/USD exchange rate broke below key psychological and technical support levels, marking its lowest point in several months. The move has caught traders’ attention, with some now recalibrating forecasts for how low the pound could fall.
– **Support Breach**: The pair fell through the 1.2500 and then 1.2400 levels, both considered important support zones by chart analysts.
– **Bearish Momentum**: Technical indicators point to strong bearish momentum, with moving averages rolling over and oscillator readings (such as RSI and MACD) confirming the shift.
– **Volume Spikes**: The breakdown was accompanied by a surge in trading volume, reinforcing the conviction behind the move.
The technical picture suggests that sellers remain in firm control, with downside targets now being revised lower. Many analysts are eyeing the late-2023 lows as the next area of potential support. Unless there is a sharp reversal in UK macro data or a shift in global risk sentiment, GBP/USD looks set to remain under heavy pressure.
## 2. Renewed Tariff Pressure Intensifies Headwinds
One of the primary drivers behind the recent collapse in GBP/USD has been the resurfacing of tariff threats. The European Union and United States are both reviewing their trade relationships with the UK in light of various post-Brexit disputes and regulatory divergences.
– **US Tariff Threat**: There is growing speculation that the Biden administration may reimpose tariffs on certain UK goods, particularly in response to digital services taxes and ongoing disagreements over trade protocols.
– **EU-UK Tensions**: Brussels has likewise signaled that further trade retaliation could be on the table if the UK follows through with regulatory divergence in areas such as financial services, food safety, or data privacy.
– **Business Impact**: UK exporters are increasingly voicing concern, warning that new tariffs could hit profit margins, reduce competitive access, and amplify economic slowdown risks.
– **Market Reaction**: Foreign exchange traders have factored in the likelihood of lower export growth and diminished foreign direct investment flows, both of which typically exert downward pressure on the currency.
The specter of a trade war, even if contained to specific sectors, injects a significant element of risk premia into sterling assets. Until an amicable resolution is reached or threats are decisively withdrawn, the pound is likely to trade with a heavy tone.
## 3. Mounting UK Recession Risks
Beyond trade frictions, the overall state of the UK economy is raising alarm bells among investors and economists alike. Recent macroeconomic releases have painted a picture of an economy teetering on the verge of contraction.
– **GDP Weakness**: UK Gross Domestic Product (GDP) growth has slowed sharply over the last two quarters, barely avoiding negative territory.
– **Retail Sales Slump**: Consumer activity, a longstanding driver of the UK economy, has waned amid declining real incomes and rising household bills.
– **Manufacturing Contraction**: PMI readings for the manufacturing and construction sectors have fallen below 50, indicating contraction and casting doubt on the strength of the post-COVID recovery.
– **Labor Market Softness**: Unemployment claims have started edging higher, with job postings declining across many industries.
– **Business Investment Drops**: Persistent
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