GBP/USD exchange rate touches four-month high in March
The pound jumped above the $1,27 benchmark on 3 March amid rising hopes for a Ukraine peace deal. The UK currency was also supported by February’s manufacturing PMI, which saw the final reading revised slightly higher. Meanwhile, the dollar was undermined by the ISM manufacturing PMI which revealed US factory growth almost ground to a halt in February.
The pound continued its upward trajectory the following day, as concerns that US trade tariffs and retaliatory measures from other countries could damage the American economy undermined the dollar.
The UK currency broke through the $1.28 level on 5 March after Donald Trump acknowledged his trade tariffs may cause “a little disturbance”. His comments, alongside downbeat US labour market data, fuelled concerns about a possible recession, prompting investors to increase bets on a Federal Reserve rate cut in May – denting the dollar.
The pound dollar exchange briefly rate edged above the $1.29 benchmark the following day. However, its bull run stalled amid a lack of UK data and a gloomy market mood that applied downward pressure on the risk-sensitive pound.
The pair consolidated its position in the $1.29 range on 12 March after the US consumer price index (CPI) for February reported inflation cooled more than expected, stoking Fed interest rate cut bets. The dollar’s downside was cushioned by hopes that lower rates may ease the pressure on the US economy.
The pound drifted lower against the dollar on 13 and 14 March amid a risk-off market mood that lifted the safe-haven US currency and underwhelming UK growth data. The UK’s GDP report for January triggered concerns about the country’s economic outlook after it unexpectedly shrank by 0.1%.
The pound dollar rate rose to a four-month high a fraction above $1.30 on 18 March as Donald Trump’s tariff war raised fears that the US economy faces a recession.
A fresh high was touched the following day. Despite keeping rates on hold as was widely expected, the Fed downwardly revised US growth forecasts, which weighed on the dollar.
It was the turn of Bank of England (BoE) rate-setters to leave rates unchanged on 20 March. Although the central bank struck a slightly more hawkish tone than expected, uncertainty surrounding the policy outlook dragged the pound down into the $1.29 mid-range.
Having been pressured by rising UK borrowing, the pound strengthened versus the dollar on 24 March after UK service sector growth jumped to a seven-month high.
The pound dollar rate retreated below $1.29 on 26 March after weaker-than-expected UK inflation data stoked expectations for a BoE rate cut in May. The UK currency extended its losses following UK Chancellor Rachel Reeves’ Spring Statement, which outlined public spending cuts and confirmed the UK’s growth forecast for this year had been halved.
The pound jumped over one percent versus the dollar the following day to within a whisker of the $1.30 level as new tariffs announced by Donald Trump renewed fears of a possible US recession.
The pound dollar exchange rate was choppy as March concluded amid encouraging UK retail sales data, an acceleration in US inflation, and Trump tariff jitters.
The pair ended the month at around $1.291.
GBPUSD: 3-Month Chart
Looking ahead
Investors in the pound will look for further signs of cooling UK inflation to reinforce BoE rate cut bets for May – conditions that could erode pound sentiment.
Influential data from the UK economy in April: GDP (11 April), ILO Unemployment Rate (15 April), Consumer Price Index (16 April), S&P Global/CIPS Composite PMI (23 April).
Influential data from the US economy in April: ISM Manufacturing PMI (1 April), ADP Employment Change (2 April), ISM Services PMI (3 April), Nonfarm Payrolls (4 April), Consumer Price Index (10 April), Producer Price Index ex Food & Energy (11 April), Retail Sales (16 April), S&P Global Composite PMI (23 April), GDP (30 April).
It’s also a fallow month in the Fed’s policy meeting calendar. Therefore, investors in the dollar will closely monitor CPI data to see if US inflation has continued to cool. While rate cut speculation would typically weigh on the dollar, hopes that lower borrowing may help the economy sidestep recession could lend it support.