The Pound Sterling slips below 1.3600 against the US Dollar, with the market focused on upcoming trade deals before the US tariff deadline on July 9. The GBP/USD rate declines as the US Dollar remains steady amid anticipation for trade news.

US Dollar Index rises by 0.35%, nearing 97.45, as US Treasury Secretary expressed confidence about impending trade agreements. Washington announced deals with the UK, Vietnam, and a limited pact with China, aiming to finalise a deal with India soon.

Trump’s Tariff Strategy

The US plans to send letters to countries lacking agreements within a 90-day tariff extension. Trump intends to notify twelve countries about initial tariff levels on their exports to the US.

Pound Sterling is under pressure due to UK fiscal risks linked to increased welfare spending, prompting potential tax rises in the Autumn Budget. Fiscal changes could cost £4.8 billion by fiscal year 2029-2030, leading to scrutiny on GDP and factory data due Friday.

The Bank of England is expected to announce a 25 basis point rate cut to 4% in August. Analysts predict more cuts in November and December. Technical analysis shows GBP/USD struggling below the 20-day EMA, with key support at 1.3500 and resistance around 1.3800.

A weaker Pound drifted beneath the 1.3600 handle, largely weighed down by growing domestic budget concerns and steady pressure from a firmer Dollar. Recent moves reflect mounting anticipation over external trade developments—particularly progress in US-led negotiations as the July 9 tariff deadline looms. Traders watched closely as the US Dollar pushed higher, with the Dollar Index edging up to levels just shy of 97.50. This strength came as Mnuchin expressed optimism over fresh trade partnerships, including early-stage pacts with Vietnam and the UK, while gearing up for further talks with Delhi.

Economic Forecast And Fiscal Policies

Meanwhile, the UK faces looming fiscal headwinds, with growing talk of increased welfare bills adding strain to public finances. The risk here isn’t merely budgetary. Forward guidance from the Chancellor hints at tax adjustments come autumn, as an estimated £4.8 billion in additional expenditure is now pencilled in through to 2029-2030. If this trajectory persists, it may feed back negatively into domestic output and sentiment. We’re due fresh GDP and manufacturing figures Friday—it wouldn’t be wise to discount a softer reading, especially if output sees factory contraction mirrored in wider economic activity.

Monetary policy expectations have shifted in response. A rate cut of 25 basis points is broadly anticipated at the August meeting, which would drag bank rate down to 4%. Forecasts hint at another move lower in November, followed possibly by a third into December. That’s a clear pivot from earlier in the year, when policymakers adopted a more patient stance. For those paying attention to the forward curve, this marks a renewed signal of growing dovishness among rate-setters.

Technically, the GBP/USD pair is failing to reclaim the territory above the 20-day EMA, signalling a lack of momentum for the Pound. The key floor at 1.3500 remains in view, having offered support in prior sessions, while upward movement would likely face hesitation near 1.3800. Given current volumes, these parameters may remain relevant for near-term positioning.

In the context of this broader shift, maintaining awareness of cross-currency funding costs and short-term interest rate spreads could be of value. We’re tracking weekly positioning closely, watching for any sharp pickup in speculative flows around upcoming macro prints or trade headlines. The timing of Washington’s planned letters to nations without current deals will be important—it introduces a potential volatility trigger if markets perceive further escalation.

Adjusting exposure accordingly, especially around scheduled data and expected policy comments, may help mitigate outsized moves. We’ve noticed that recent rallies tend to fade early, suggesting bulls are short-lived in their conviction. Participants should take care not to lean too heavily into risk just yet, especially as Summer liquidity conditions thin.

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