- The Pound Sterling falls marginally to near 1.3580 against the US Dollar as Trump vows to push forward with new tariffs.
- Trump prepares to announce new tariff rates for over seven nations and indicated his intention to impose levies on copper and pharma products.
- Rising UK gilt yields pose long-term fiscal risks for the economy.
The Pound Sterling (GBP) edges lower to near 1.3580 against the US Dollar during European trading hours on Wednesday, with the GBP/USD pair broadly stable after United States (US) President Donald Trump threatened a series of new tariffs on Tuesday.
At the time of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades at 97.50, broadly stable on the day and not far from the weekly high of around 97.80
On Tuesday, US President Trump stated in a cabinet meeting that he will impose 50% tariffs on copper imports, aiming to boost domestic production. However, he didn’t provide a time frame. This marks the fourth specific product catergory targeted by Trump’s tariffs following automobiles and auto parts, steel, and aluminum.
Apart from higher import duties on copper, US President Trump also threatened to impose an additional 10% tariffs on BRICS nations for attempting de-dollarization practices, and a 200% tax on pharmaceutical imports next year.
Daily digest market movers: Pound Sterling regains compsure while UK fiscal risks escalate
- The Pound Sterling trades calmly against its major peers on Wednesday. The British currency regains composure after a sharp decline last week, following a relentless sell-off in United Kingdom (UK) gilt securities after Chancellor of the Exchequer Rachel Reeves broke her self-imposed fiscal rules to support a major reform in the welfare spending bill.
- UK gilt yields rallied last week after Chancellor Reeves announced an increase in standard allowance for Universal Credit (UC) before the House of Commons without outlining the source of funds to support this additional spending. An increase in the welfare bill is expected to increase the financial burden on the government’s books by £4.8 billion by fiscal year 2029-2030.
- Higher gilt yields means increased interest obligations for the administration. According to the Office for Business Responsibility (OBR), the UK has the third-highest borrowing costs of any developed economy, with 10-year gilt yields at around 4.63%.
- In terms of economic data, investors will focus on the monthly Gross Domestic Product (GDP) and factory data for May, which are scheduled to be released on Friday.
British Pound PRICE Today
The table below shows the percentage change of British Pound (GBP) against listed major currencies today. British Pound was the weakest against the Swiss Franc.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.17% | 0.03% | 0.07% | 0.25% | 0.04% | 0.10% | -0.05% | |
| EUR | -0.17% | -0.12% | -0.10% | 0.08% | -0.10% | -0.08% | -0.10% | |
| GBP | -0.03% | 0.12% | 0.06% | 0.21% | -0.05% | -0.02% | -0.07% | |
| JPY | -0.07% | 0.10% | -0.06% | 0.16% | -0.01% | 0.02% | -0.09% | |
| CAD | -0.25% | -0.08% | -0.21% | -0.16% | -0.16% | -0.15% | -0.15% | |
| AUD | -0.04% | 0.10% | 0.05% | 0.01% | 0.16% | 0.01% | 0.00% | |
| NZD | -0.10% | 0.08% | 0.02% | -0.02% | 0.15% | -0.01% | -0.05% | |
| CHF | 0.05% | 0.10% | 0.07% | 0.09% | 0.15% | -0.00% | 0.05% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).
- Investors will also focus on the additional letters by US President Trump to be sent to over seven countries. These are expected to outline tariffs rates after not closing a trade deal during the 90-day pause. “We will be releasing a minimum of 7 Countries having to do with trade, tomorrow morning, with an additional number of Countries being released in the afternoon. Thank you for your attention to this matter!” Trump wrote in a post on Truth.Social. Still, the impact of these letters could to be limited as the effective date for imposition of reciprocal tariffs has been extended to August 1.
- During the North American session, investors will pay attention to the release of the Federal Open Market Committee (FOMC) minutes of the July 17-18 policy meeting.
Technical Analysis: Pound Sterling struggles around 20-day EMA
The Pound Sterling trades in a limited range around 1.3600 against the US Dollar on Wednesday. The GBP/USD pair wobbles around the 20-day Exponential Moving Average (EMA) near 1.3590, suggesting that the near-term trend is uncertain.
The 14-day Relative Strength Index (RSI) stays near 50.00, indicating that the bullish momentum has faded.
Looking down, the psychological level of 1.3500 will act as a key support zone. On the upside, the three-and-a-half-year high around 1.3800 will act as a key barrier.
Tariffs FAQs
Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.
Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.
There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.
During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.
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