GBP/USD exchange rate touches seven-month high in April
The pound dollar exchange rate jumped more than 1% into the 1.31 mid-range on 3 April amid growing concerns that Donald Trump’s tariffs could derail the US economy. This caused the US currency to plummet to multi-month lows and allowed the pound to sidestep the UK’s services PMI for March, which missed forecasts.
The pound arrested its gains on 4 April after the UK government opened the door to possible retaliatory measures against US tariff plans, dampening chances of a potential trade agreement. Meanwhile, the dollar rebounded following a stronger-than-forecast US payrolls report.
By 7 April, the pound had dropped to around 1.272 versus the dollar as the chances of the UK agreeing a trade deal with the US deteriorated further.
The pound dollar rate rose to within a whisker of the 1.30 benchmark on 10 April after Donald Trump rowed back on his tariff plans, causing the US currency to stumble. This was compounded by the US CPI for March, which showed inflation cooled more than expected. Investors subsequently ramped up bets on an interest rate cut from the Federal Reserve.
The pound briefly spiked above 1.31 versus the dollar the following day after data showed the UK economy grew by a faster-than-expected 0.5% in February. Despite the headline growth, analysts cautioned that it could mark the last month of expansion before the impact of US trade tariffs is felt. Meanwhile, the dollar sank to its lowest level in three years.
The pound dollar rate rose to within touching distance of the 1.33 benchmark by 16 April amid renewed UK-US trade optimism before UK inflation data checked its stride. The CPI for March showed inflation cooled from 2.8% to 2.6% – a three-month low that reinforced expectations of a Bank of England (BoE) rate cut in May.
Following the Easter break, the pound hit a seven-month high above the 1.34 resistance level on 22 April as an improving market mood and hopes that the UK may be less impacted by trade tensions, supported the UK currency.
The pound failed to cling onto its gains, falling into the 1.32 range the following day after the UK’s PMI survey showed a surprise contraction in British service sector activity in April. Meanwhile, the dollar was boosted by US trade deal optimism, which helped temper fears that trade tensions could trigger a US recession.
The pound jumped above the 1.34 level against the dollar on 28 April as tariff fears weighed on the US currency. Conversely, the pound was bolstered by the UK’s possible resilience to growing trade tensions. The Confederation of British Industry’s (CBI) latest distributive trades survey provided further support, exceeding forecasts to post a six-month high in April – although it still pointed to a decline in sales volumes.
The pound slid lower against the dollar as April concluded. The US currency shrugged off alarming GDP figures amid hopes Donald Trump may ease some of his tariff plans. Meanwhile, the pound was dragged lower by the prospect of a BoE interest rate cut and fresh doubts over a future UK-US trade agreement.
The pound dollar exchange rate ended the month at around 1.332.
GBPUSD: 3-Month Chart
Looking ahead
The BoE is widely expected to lower interest rates on 8 May, in response to cooling UK inflation. If this is priced into the market, downward pressure on the pound will be limited.
Influential data from the UK economy in May: ILO Unemployment Rate (13 May), Average Earnings (13 May), GDP (15 May), Consumer Price Index (21 May), S&P Global/CIPS Composite PMI (22 May), Retail Sales (23 May).
The dollar could find support if, as expected, the Federal Reserve leaves US interest rates untouched on 7 May. The US central bank has signalled that it may be too early to cut rates amid economic uncertainty and ahead of data that will provide a clearer picture of the economic impact of tariffs.
Influential data from the US economy in May: ISM Manufacturing New Orders Index (1 May), Nonfarm Payrolls (2 May), ISM Services PMI (5 May), Consumer Price Index (14 May), Retail Sales (15 May), Producer Price Index excluding Food & Energy (15 May), Michigan Consumer Sentiment Index (16 May), S&P Global Composite PMI (21 May), GDP (29 May).