GBP/USD exchange rate hits near four-year high in June
The pound dollar exchange rate jumped almost 1% into the 1.35 mid-range on 2 June after US-China trade tensions and a disappointing US ISM manufacturing PMI dented the US currency.
The pair briefly broke through the 1.36 benchmark on 5 June after the dollar was pressured by US initial jobless claims, which unexpectedly rose to their highest level since early October. The print added to evidence of a slowing US labour market, boosting bets that the Federal Reserve may soon cut interest rates.
The dollar rallied the following day thanks to a stronger-than-expected rise in US nonfarm payrolls for May, which eased rate cut concerns. Meanwhile, the pound struggled due to doubts about finalising a UK-US trade agreement, damaging recent optimism about the UK economy.
The pound plunged below the 1.35 benchmark on 10 June as figures showed a rise in UK unemployment in April and weaker-than-forecast wage growth – further signs of a labour market slowdown that increased speculation over Bank of England (BoE) rate cuts.
The pound firmed the next day as investors digested the UK government’s latest spending review, which indicated that Chancellor Rachel Reeves’s plans can broadly be viewed as a success. Meanwhile, the dollar was pressured by a softer-than-expected US inflation reading that prompted investors to place fresh bets on a Federal Reserve interest rate cut in July.
By 12 June, the pound had risen above 1.36 against the dollar after the US currency hit a three-year low amid concerns over the Trump administration’s tariff policy and its potential impact on the economy. However, the pound arrested its gains following the release of downbeat UK GDP figures, which showed the economy contracted 0.3% in April, far more than forecast.
The pound slipped to around 1.352 against the dollar on 13 June as a recent run of lacklustre UK data stoked speculation that the BoE may accelerate its monetary easing. Conversely, the dollar surged higher as escalating tensions in the Middle East led investors to flock to safe-haven assets.
Having regained its footing and climbed above 1.36 on 16 June, the pound dollar rate plunged to around 1.341 the following day ahead of the BoE’s interest rate decision. Meanwhile, the dollar continued to benefit from its safe-haven status.
The pair remained under pressure on 18 June after the Federal Reserve held interest rates steady and policymakers signalled borrowing costs are still likely to fall in 2025.
The pound firmed on 19 June after the BoE delivered an expected rate hold, with Governor Andrew Bailey pushing back on market expectations of an interest rate cut in August.
The pound edged to within touching distance of the 1.35 benchmark against the dollar the following day before retreating. Its downside was prompted by lacklustre UK retail data, with sales slumping 2.7% in May, far worse than the forecast 0.5% drop.
The pound rebounded from a one-month low of around 1.337 against the dollar on 23 June. The US currency was supported by safe-haven demand as investors assessed the risk of an Iranian response to US attacks, before a broadly positive response to the UK’s new industrial strategy propelled the UK currency above 1.35.
The UK currency extended its gains the following day, rising into the 1.36 range against the safe-haven dollar amid its increasingly risk-sensitive nature, with markets buoyed by the Israel-Iran ceasefire agreement.
The pound dollar rate broke through the 1.37 resistance level on 26 June, hitting its highest level in almost four years, following a report that Donald Trump could expedite the naming of the new head of the Federal Reserve.
The pound wavered on 30 June, despite confirmation that the UK economy was the fastest-growing economy in the G7 in the first three months of the year. The UK currency was dented by accompanying figures that showed real household disposable income per head fell for the first time in almost two years. However, the pound’s downside was limited by a faltering dollar amid renewed US deficit concerns.
The pound dollar exchange rate ended June at around 1.373.
GBPUSD: 3-Month Chart
Looking ahead
Influential data from the UK economy in July: Consumer Price Index (16 July), ILO Unemployment Rate (17 July), S&P Global Composite PMI (24 July), Retail Sales (25 July).
Futures market pricing indicates virtually no chance of a Fed rate cut following its next policy meeting on 30 July, with the next move expected to come in September.
Influential data from the US economy in July: ISM Manufacturing PMI (1 July), ADP Employment Change (2 July), nonfarm payrolls (3 July), average hourly earnings (3 July), ISM Services PMI (3 July), Michigan Consumer Sentiment Index (4 July), Consumer Price Index (15 July), Producer Price Index ex Food & Energy (16 July), Retail Sales (17 July), S&P Global Composite PMI (24 July), GDP (30 July), Core Personal Consumption Expenditures Price Index (31 July).