GBP/USD Surges on UK Labor Market Strength, Dollar Slides Amid Tariff Turbulence

Economic

Summary:

The British Pound surged to a six-month high, supported by robust UK employment data and a weakening US Dollar, which continues to struggle under the weight of trade policy uncertainty and dovish signals from the Federal Reserve.

BUY GBPUSD

Close Time

CLOSED

1.32500

Entry Price

1.34000

1.31000

1.33195 -0.00117 -0.09%

150.0

Pips

Profit

1.31000

1.34002

Exit Price

1.32500

Entry Price

1.34000

The Pound Sterling extended its upward trajectory on Tuesday, soaring to its highest level in six months against the US Dollar as investors reacted to a potent mix of resilient UK employment figures and growing unease about the structural appeal of the Greenback. The GBP/USD pair climbed to an intraday high of approximately 1.3235 during the European session, solidifying its bullish stance as traders weighed contrasting narratives on both sides of the Atlantic.

The catalyst for Sterling's latest rally came from encouraging UK labor market data for the three months ending in February, which painted a picture of underlying strength in an otherwise subdued economic landscape. Employment levels rose more than expected, signaling that despite persistent inflation and a cautious consumer environment, businesses continued hiring at a steady pace. The data added weight to the notion that the Bank of England might hold interest rates higher for longer, particularly if the momentum in employment begins to translate into wage pressures and broader inflationary persistence.

With the next Consumer Price Index (CPI) data for March scheduled for release on Wednesday, market participants are increasingly focused on inflation's trajectory and how it might influence the Bank of England’s future policy decisions. A stronger-than-anticipated inflation print could further fuel expectations of a delayed pivot toward monetary easing, thereby providing additional support to the Pound.

Across the Atlantic, the US Dollar has found itself under sustained pressure, undermined by a combination of policy inconsistency and a shift in tone from Federal Reserve officials. The US Dollar Index (DXY), a measure of the Greenback’s performance against a basket of six major currencies, is treading water just above the three-year low at 99.00. This prolonged softness reflects waning investor confidence in the US Dollar’s safe-haven status, a decline largely attributed to the erratic nature of trade policy decisions coming from Washington.

In the latest twist to the ongoing trade saga, President Donald Trump suggested on Monday that his administration is considering a temporary suspension of tariffs on imported automobiles and related parts. Speaking to reporters, Trump acknowledged that US-based car manufacturers require additional time to shift their supply chains domestically, particularly after years of reliance on Canadian, Mexican, and Asian components. “They’re switching to parts that were made in Canada, Mexico and other places, and they need a little bit of time, because they’re going to make them here,” Trump said, as reported by Bloomberg. The potential pause follows an earlier announcement of a 90-day moratorium on reciprocal tariffs — a move that exempted all trading partners except China — further underscoring the administration's reactive rather than strategic approach to trade.

These frequent reversals have significantly eroded confidence in the long-term credibility of US trade policy, leading to a broader reassessment of the Dollar’s role as a global safe haven. Investors now face the challenge of interpreting policy intentions that appear increasingly improvised, making it difficult to forecast long-term trends.

Exacerbating the Dollar’s vulnerability, the Federal Reserve appears to be slowly tilting toward a more dovish posture. On Monday, Federal Reserve Governor Christopher Waller introduced a cautious but significant note, suggesting that in the event of a recession, the Fed would prioritize growth over inflation containment. Waller indicated that even if inflation remained elevated, the central bank would consider rate cuts should economic risks intensify. “I expect the risk of recession would outweigh the risk of escalating inflation, especially if the effects of tariffs in raising inflation are expected to be short-lived,” he noted.

Such comments have given markets fresh reason to believe that the Fed could pivot sooner than previously expected, particularly if economic data begins to weaken or if the uncertainty surrounding trade begins to seep into business investment and consumer confidence. The juxtaposition of a potentially dovish Fed and a Bank of England still grappling with inflation creates an environment highly favorable to the Pound, at least in the short term.

Technical Analysis

From a technical perspective, the GBP/USD pair has been carving out an orderly ascent within a well-defined uptrending channel. Recent price action confirms the bullish structure, with the pair successfully retesting prior support levels before resuming its climb. The area around 1.3200 had acted as a notable resistance level in past weeks, and the pair’s ability to break above this barrier signals strong bullish momentum.

Should the rally extend further, the next psychological threshold lies near the 1.3400 mark, which would represent a significant technical and symbolic milestone for Sterling bulls. Momentum indicators such as the RSI remain supportive, indicating that the rally still has legs in the absence of a strong Dollar recovery or an unexpected UK inflation miss.

TRADE RECOMMENDATION

BUY GBPUSD

ENTRY PRICE: 1.3240

STOP LOSS: 1.3100

TAKE PROFIT: 1.3400

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