GBP/USD Dips below 1.3300 as UK Confidence Fades and USD Gains in Tariff Shift Talks
GBP/USD exchange rate dipped below the 1.3300 level in Friday’s Asian session under pressure from a mix of damped UK consumer confidence and US Dollar strength. Pound Sterling was put under pressure after April’s GfK Consumer Confidence index fell to -23, its lowest level since November 2023, on the back of increased living expenses and international trade uncertainty. At the same time, the Greenback picked up strength after news came out that China might put its 125% tariffs on certain US imports on hold, propelling market expectations of US trade talks. Though US Initial Jobless Claims just missed forecasts at 222,000, general sentiment is still in favor of the USD leading up to key data releases throughout the day. KEY LOOKOUTS • Market participants are particularly focused on the forthcoming UK Retail Sales announcement, which has the potential to provide new data on consumer activity and shape short-term Pound movements. • This prominent indicator will assist in determining US consumer confidence and potentially drive expectations of Fed policy, influencing the USD. • Markets are responding to news that China is likely to suspend its 125% tariff on some US imports. Any confirmation or denial by the authorities could change global risk sentiment and favor the Dollar. • Although there was a marginal increase in US Initial Jobless Claims, the fall in Continuing Claims indicates mixed labor conditions, which can influence investor expectations regarding economic strength and Fed rate moves. Investors are looking to some major developments which may have a bearing on the GBP/USD direction in the short term. The next UK Retail Sales data will be key in determining the resilience of local consumption with decreasing consumer confidence. In the United States, the final result for the Michigan Consumer Sentiment Index will reveal more about household perceptions, potentially altering Federal Reserve assumptions. While all of this is going on, news that China can suspend its 125% tariff on some US imports has given hope to global trade, supporting the US Dollar. Plus, confusing news from US labor data—increasing Initial Jobless Claims offset by decreasing Continuing Claims—are keeping traders on their toes as they wait for additional economic reports. Traders are targeting UK Retail Sales and US Michigan Consumer Sentiment data for new market guidance. In the background, news that China may ease tariffs on imports from the US is helping support the Dollar. Uncertainty-creating mixed US labor data still hangs over the outlook. • A key consumer spending gauge capable of influencing the strength or weakness of GBP. • The last decline to -23 indicates weakened UK sentiment dampening the Pound. • A measure of US consumer sentiment that can influence USD and Fed rate expectations. • News of China relaxing its 125% tariff on some US imports can be supportive of risk appetite and lift the Dollar. • Conflicting labor data creates uncertainty in the path of the USD, driving short-term volatility. • Recovering currently around 99.80, DXY performance is indicative of overall USD strength versus major currencies. • Continuous US negotiations with significant Asian allies such as Japan and South Korea are likely to have an effect on the risk tone and market sentiment. GBP/USD pair is presently affected by a combination of economic and geopolitical influences forming the overall market sentiment. In the UK, confidence among consumers has suffered, with April’s GfK Consumer Confidence index plummeting to -23—its lowest since November 2023. The decline reflects increasing unease among households regarding increasing living expenses and overall economic uncertainty. Consequently, investors are keenly watching for upcoming UK Retail Sales data, which will give a better indication of the strength of domestic consumption and the state of the economy. GBP/USD DAILY CHART PRICE CHART SOURCE: TradingView Internationally, news is that China can temporarily suspend the 125% tariff on specific US imports such as medical devices and aircraft leasing. This piece of news has created a glimmer of hope regarding global trade relations and has the potential to have wider repercussions for market mood. Furthermore, developments in US trade talks with Asian allies like South Korea and Japan are of keen interest among market participants. In the US, mixed labour market indicators—such as higher jobless claims while continuing claims are declining—continue to guide expectations on economic strength and near-term policy interventions. TECHNICAL ANALYSIS GBP/USD broke below the major psychological support line of 1.3300, indicating the possibility of changing short-term market sentiment. The pair is now trading around 1.3290, showing stronger bear pressure. If the selling momentum remains intact, the next support region would be witnessed around 1.3250. On the positive side, any bounce can be expected to encounter resistance around 1.3350, where recent consolidation has taken place. Traders will be looking for confirmation signs in the form of candle patterns or volume changes to gauge the power of this breakout and determine the probability of a sustained trend reversal or a short-term pullback. FORECAST If stronger-than-anticipated consumer demand in the latest UK Retail Sales figures is reflected, this may reclaim some of the confidence in the Pound, leaving some space for a short-term rebound in GBP/USD. Furthermore, if US economic signals like the Michigan Consumer Sentiment Index are lower than anticipated, this may weaken the Dollar and favor a recovery in the pair. Here, GBP/USD may test the resistance levels near 1.3350 and may reach as high as 1.3400, if risk sentiment on the back of easing global trade tensions. Conversely, sustained UK weakness, especially if Retail Sales fall or consumer sentiment continues to be weak, may intensify pressure on the Pound. If the US Dollar continues to hold firm—driven by hopes over trade negotiations or steady labor market data—the pair can continue its fall. A break below 1.3290 may open the gates towards the next support at 1.3250, and if bearish pressure continues, further losses towards 1.3200 cannot be excluded.