ExchangeRates.org.uk – At the time of writing, GBP/USD traded at $1.3148, it’s highest level since October 2024 and a 1.3% increase from Wednesday.The US Dollar (USD) plummeted on Wednesday evening and into Thursday’s session as markets reacted to US President Donald Trump’s latest tariff announcement.
On what he had dubbed ‘liberation day’, Trump unveiled sweeping tariffs on dozens of countries, including a blanket 10% tariff on goods imported into the US and higher reciprocal tariffs on countries that already tax US exports.
The announcement fuelled recent fears that the American economy will fall into recession this year.
Analysts at Barclays (LON:BARC) said there was now a ‘high risk’ of a US recession, along with rising inflation and higher unemployment.
Amid these concerns, the US Dollar cratered, with the USD index – which measures the ‘Greenback’ against a basket of currencies – plunging almost 1.4% to its lowest level since October last year.
Meanwhile, the Pound (GBP) was able to capitalise on the US Dollar’s weakness, with GBP/USD soaring to a six-month high.
Although US tariffs and a global trade war are set to hit the UK economy, the impact is expected to be far less damaging than the effect on the US.
The UK also got off relatively lightly in terms of tariffs, with just a 10% tariff set to hit British exports to the US.
Looking ahead, Donald Trump’s sweeping tariffs could continue to drive volatility in the currency market through the rest of the week as markets digest their implications and react to how other countries and trading blocs respond.
If we see strong retaliatory measures and signs that a global trade war could escalate then US recession fears may continue to weigh on the US Dollar.
New US data could also impact GBP/USD, with the latest American jobs data out on Friday.
An expected slowdown in the March non-farm payrolls figures could fuel further USD losses if they add to anxiety over the American economy.
In addition, Federal Reserve Chair Jerome Powell is due to speak on Friday afternoon.
If the Fed chief raises concerns about the impact of a global trade war on US growth then GBP/USD could potentially test new multi-month highs.
This content was originally published on ExchangeRates.org.uk
