GBP/USD hits 6-month high as dollar weakness deepens on trade worries
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The British pound extended its bullish momentum on Tuesday, climbing to a fresh six-month high of 1.3220 against the US dollar, marking the sixth consecutive session of appreciation. The move comes ahead of the UK’s March inflation release and reflects not only supportive domestic fundamentals but also significant structural weakness in the dollar, which continues to suffer amid rising geopolitical and trade-related risks.
The US dollar index (DXY) slipped below the critical 100.00 threshold, a level last seen in April 2022, highlighting broad-based softness in the greenback. The retracement appears driven less by economic data and more by escalating uncertainty surrounding US trade policy. President Trump's renewed rhetoric on aggressive tariff enforcement has reignited concerns over the potential drag on US growth expectations, pushing investors toward alternative safe-haven or higher-yielding currencies, including the euro, yen, and sterling.
While the pound is benefitting from this global rotation, UK-specific factors remain in focus. Market participants are awaiting the March Consumer Price Index (CPI) report, due Wednesday, with consensus estimates pointing to a slight moderation in annual inflation to 2.7% from 2.8% in February. If confirmed, this would align with the Bank of England’s narrative of a gradual disinflationary trend, potentially paving the way for monetary easing later in the year.
Nevertheless, the BoE has so far maintained a cautious stance, keeping the bank rate unchanged in its last meeting and warning markets not to price in premature rate cuts, especially in the context of external volatility. The next monetary policy decision is scheduled for May 8, and upcoming macro data will be key in shaping expectations.
In conclusion, GBP/USD continues to benefit from a confluence of relative macro stability in the UK and a deteriorating risk premium on the US dollar. Traders will closely monitor the CPI print and central bank guidance, while remaining sensitive to any further developments on the US-China trade front that could alter the dollar's trajectory.
The US dollar index (DXY) slipped below the critical 100.00 threshold, a level last seen in April 2022, highlighting broad-based softness in the greenback. The retracement appears driven less by economic data and more by escalating uncertainty surrounding US trade policy. President Trump's renewed rhetoric on aggressive tariff enforcement has reignited concerns over the potential drag on US growth expectations, pushing investors toward alternative safe-haven or higher-yielding currencies, including the euro, yen, and sterling.
While the pound is benefitting from this global rotation, UK-specific factors remain in focus. Market participants are awaiting the March Consumer Price Index (CPI) report, due Wednesday, with consensus estimates pointing to a slight moderation in annual inflation to 2.7% from 2.8% in February. If confirmed, this would align with the Bank of England’s narrative of a gradual disinflationary trend, potentially paving the way for monetary easing later in the year.
Nevertheless, the BoE has so far maintained a cautious stance, keeping the bank rate unchanged in its last meeting and warning markets not to price in premature rate cuts, especially in the context of external volatility. The next monetary policy decision is scheduled for May 8, and upcoming macro data will be key in shaping expectations.
In conclusion, GBP/USD continues to benefit from a confluence of relative macro stability in the UK and a deteriorating risk premium on the US dollar. Traders will closely monitor the CPI print and central bank guidance, while remaining sensitive to any further developments on the US-China trade front that could alter the dollar's trajectory.