Original Article Credit: TradingNews.com
Title: GBP/USD Forecast Falls to 1.34 as Dollar Rises Amid Trump’s China Policy Shift
Author: TradingNews Staff
The British pound weakened significantly against the US dollar, falling to the 1.34 level, as global markets responded to renewed US-China trade tensions driven by a shift in US policy under the Trump administration. The USD gained strength broadly, bolstered by safe-haven demand and interest rate expectations, while the pound suffered setbacks due to both global risk aversion and internal political uncertainty over Brexit-related developments.
This article provides a detailed breakdown of the GBP/USD movements, covering the factors behind the drop in the British pound, the resurgence in the US dollar, and what investors and traders might expect in the near to medium term.
Pound Under Pressure: An Overview
Throughout the trading sessions last week, GBP/USD continued to trend downward. The currency pair reached lows not seen in several months, hitting the 1.34 level—a critical support zone for many technical traders and analysts.
Key factors driving the pound’s weakness include:
– Renewed concerns over Brexit as political divisions in the UK intensify uncertainty.
– Lackluster economic performance in the UK highlighted by recent data showing slowing growth and fragile labor markets.
– Loss of investor appetite for risk-correlated assets as geopolitical tensions increase.
– Broad-based US dollar strength amid heightened global uncertainty.
UK Political and Economic Backdrop
A major contributor to sterling’s recent decline is the deteriorating political climate in the UK concerning Brexit. With negotiations ongoing, market participants remain cautious due to the unpredictability of outcomes. The absence of a clear resolution amplifies volatility.
Relevant political and economic considerations include:
– Unresolved trade tensions between the UK and the European Union post-Brexit add to uncertainty in capital markets.
– The UK government is facing criticism over its handling of economic recovery policies, which weighed heavily on investor sentiment.
– Recent economic indicators from the UK—such as manufacturing and services PMIs—have come in below forecasts, signaling a potential slowdown.
– Consumer confidence and retail sales figures reported over the past few weeks also showed signs of weakening.
US Dollar Gains Momentum
In contrast with the troubled pound, the US dollar has been attracting safe-haven flows amid a revived risk-off environment. Investors are increasingly looking to the dollar amid fresh tensions in the global trade landscape, mainly due to the Trump administration’s policy shift toward China.
Reasons contributing to the dollar’s rise include:
– Heightened global uncertainty has driven investors toward traditional safe-haven assets such as the dollar and US Treasuries.
– Strongening US economic indicators such as retail sales, consumer sentiment, and employment figures provide a solid foundation for the greenback.
– Expectations that the Federal Reserve may maintain or even raise interest rates sooner than expected based on inflation data and economic recovery trends.
– Increased demand from central banks and international institutions for dollar-denominated assets amid liquidity concerns globally.
The Trump-China Shift Explained
The key catalyst this week affecting currency markets has been US President Donald Trump’s renewed hardline rhetoric against China. The administration has revisited trade and technology-related policies that reintroduce tariffs and reframe commercial arrangements with Beijing.
Specific points of concern include:
– New administrative measures targeting Chinese tech companies and investments in US-based infrastructure and innovation.
– Reintroduction of discussions around tariffs on specific industry sectors, including automotive and semiconductor exports.
– Allegations against China regarding the use of unfair business practices and intellectual property theft, leading to higher trade barriers.
– Signals from White House officials suggesting a more defensive economic posture focused on reducing American trade exposure to Chinese firms.
These developments have raised investor fears of renewed trade wars, which historically have led to global risk aversion and a preference for stability, thereby benefiting the dollar.
Technical Analysis: GBP/USD
From a technical standpoint, GBP/USD has broken below key support levels, reinforcing bearish sentiment in the market. Traders are watching closely for price action around the 1
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