The GBP/USD exchange rate rose by 0.6% on Tuesday as tensions related to tariff disputes eased. Recent developments suggest that trade war threats from the Trump administration are losing prominence. However, with significant economic data events set to unfold later in the week, including the Bank of England’s (BoE) interest rate decision and the US Nonfarm Payroll report, market observers remain cautious.
The recent increase in GBP/USD comes after a notable decline earlier in the week, driven by concerns over the potential imposition of hefty tariffs by the US. Originally scheduled to take effect, these tariffs have been postponed for another 30 days. This marks a recurring pattern where the Trump administration has moderated its stance, securing concessions that align with those offered by prior administrations.
As the week progresses, economic data releases are expected to be minimal. Investor focus is shifting away from the geopolitical climate as attention drifts from Trump’s extensive commentary on trade. It appears that the UK is unlikely to be specifically targeted by any of these emerging trade dynamics.
Attention will turn to upcoming US economic indicators, with the ADP Employment Change report due on Wednesday, though it is not anticipated to generate significant market movement. The ISM Services PMI results are also on the agenda, with expectations of a slight increase. The key highlight for the week will be the Nonfarm Payrolls report, with estimates indicating a decline to 170,000 jobs added in October from 256,000 in September.
Looking ahead to the BoE’s interest rate decision on Thursday, analysts predict a potential cut of 25 basis points. With the Federal Reserve adopting a more cautious approach, the interest rate differential between the UK and the US is likely to widen, which may constrain the bullish sentiment for GBP/USD in the near term. The current exchange rate stands at 1.2480, facing resistance near the 1.2500 level, and potential volatility could see movements toward either 1.2700 or a retreat back to around 1.2100.
