The GBP/USD pair dropped to 1.3602 on Thursday, marking a two-week low amid a strengthening US dollar and growing concerns over the UK’s public finances.
The sell-off intensified after US President Donald Trump confirmed the imposition of 25% tariffs on goods from 14 countries, including Japan and South Korea, effective 1 August. So far, only the UK and Vietnam have secured exemptions from these new tariffs, which are in addition to existing duties on cars, steel, and aluminium.
London is now scrambling to negotiate a US deal to exclude British steel from the tariffs. Failure to do so could see the rate rise to 50%, posing a severe threat to the UK’s already struggling steel industry.
Further pressure on the pound came from a bleak forecast by the Office for Budget Responsibility (OBR), warning that public debt could exceed 270% of GDP by the early 2070s. Key drivers include an ageing population, rising healthcare and pension costs, and heightened geopolitical tensions, which may necessitate increased defence spending – adding further uncertainty to the UK’s long-term fiscal stability.
Technical Analysis: GBP/USD
H4 Chart:
- The pair completed a downward wave to 1.3525, followed by a recovery to 1.3590
- Today, we anticipate a narrow consolidation range near this level
- A breakout upwards could extend the correction to 1.3657, after which a fresh decline towards 1.3520 is expected, with a longer-term target at 1.3465
- MACD confirmation: The signal line remains below zero, indicating a firm downward trend
H1 Chart:
- The market has finished a correction to 1.3590, with consolidation now forming
- An upward breakout may push the pair towards 1.3656, but a subsequent drop to at least 1.3520 is likely
- Stochastic confirmation: the signal line is below 80, trending downward towards 20.
Conclusion
The GBP/USD remains under downward pressure, with fundamental and technical factors aligning for further weakness. A short-term correction is possible, but the broader trend suggests additional declines ahead.
