GBPUSD Holds Ground Amid Tariff Turmoil

The British Pound (GBP) found modest support against the U.S. Dollar (USD) on Monday, after falling to a one-month low near 1.2830 during the Asian session. Although the pair recovered slightly to the 1.2900 level, bullish momentum remained limited amid persistent global economic concerns. Investor sentiment has been rattled by U.S. President Donald Trump's recent announcement of sweeping reciprocal tariffs, which sparked fears of an intensifying global trade war.

These protectionist measures continue to weigh on risk appetite, as reflected in the sharp downturn across global equity markets. This environment has bolstered demand for the USD as a safe-haven asset, placing further pressure on GBP. However, expectations that the Federal Reserve may respond to a tariff-induced economic slowdown with multiple rate cuts have tempered USD strength. Markets are currently pricing in four 25-basis-point cuts for 2025, contributing to a steep drop in U.S. Treasury yields and limiting the dollar’s upside.

In contrast, the Pound is drawing support from speculation that the Bank of England (BoE) will adopt a more cautious path in reducing interest rates. This divergence in monetary policy outlooks provides underlying support for the GBP/USD pair. Technically, a rebound from the 200-day Simple Moving Average also points to continued bullish bias, suggesting a potential for further gains should market conditions stabilize.

Elsewhere, the Euro (EUR) saw volatile price action last week. Initially pressured by expectations of an ECB rate cut amid softer Eurozone inflation data, the currency later surged as investors rotated out of the dollar. Trump's tariff announcement drove the USD lower and boosted safe-haven demand, helping the Euro rally sharply in the latter part of the week despite concerns over a new 20% U.S. duty on EU exports.

The Pound, meanwhile, began the week on stable footing, supported by hopes of a last-minute UK-U.S. trade deal. Although the UK failed to secure an exemption, the relatively light 10% tariff was initially seen as a relief. That optimism faded quickly when Prime Minister Keir Starmer indicated that the UK would consider retaliatory tariffs. The GBP's decline accelerated after March's services PMI was revised lower, signaling weaker economic momentum.

Looking ahead, volatility is likely to persist as markets digest the broader impact of U.S. tariffs. If the UK or EU retaliate, both the Pound and Euro could face renewed selling pressure. Upcoming UK GDP data may offer some support if it confirms economic growth in February. Meanwhile, savers in the UK are being advised to act fast, as high-interest savings accounts remain attractive despite the BoE holding rates at 4.5%. With inflation easing and further rate cuts on the horizon, locking in favorable rates now could help protect against diminishing returns in the months ahead.