May 29, 2025 – Written by Frank Davies

STORY LINK Pound to Dollar Forecast: “Downward Bias Toward 1.3395” say UoB

The dollar secured net gains on Thursday after a US court ruled that the US Administration unilateral tariffs based on emergency legislation were not constitutional.

The bigger impact was a further decline in demand for safe-haven currencies with the yen and Swiss franc posting sharp losses. Asian currencies overall lost ground while the Pound was resilient in global markets.

The dollar failed to hold its best levels as Trump will not roll over and accept the Court’s judgement with all avenues explored to pursue his trade policy.

The decision will also inject another level of economic uncertainty, especially as the Administration will appeal against the ruling.

There was still an immediate boost to risk appetite with strong gains for equity futures.

US S&P 500 futures were around 1.5% higher and the FTSE 100 index will open higher

The Pound was also cushioned by stronger risk conditions with the Pound to Dollar (GBP/USD) exchange rate near 1.3450 from 1.3415 lows.

According to UoB; “Today, we expect GBP to trade with a downward bias toward 1.3395. A sustained break below this level seems unlikely.”

On a slightly longer-term view, it expects a 1.3330/1.3530 range rather than of a sustained decline

The Court of International Trade ruled that an emergency law invoked by the White House does not give the president unilateral authority to impose tariffs on international countries.

According to Court the US Constitution gives Congress exclusive powers to regulate commerce with other nations and this is not superseded by the president’s remit to safeguard the economy.

It added that the International Emergency Economic Powers Act (IEEPA), a 1977 law that Trump cited to justify the tariffs, does not give him the power to impose the sweeping tariffs.

Tariffs based on the crackdown of fentanyl smuggling were also declared unconstitutional.

The sectoral tariffs in areas such as Aluminium and steel are not affected.

It gave the Administration 10 days to remove the tariffs.

The Administration will appeal against the decision and the tariffs will continue to be collected until the appeals are heard.

If the ruling is upheld, tariffs collected so far will have to be repaid.

MUFG commented; “The Trump administration has filed a notice of appeal with the US Trade Court, where it is very likely to go not just to the Court of Appeal but likely up to the US Supreme Court.”

Yunosuke Ikeda, head of macro research at Nomura commented; “It’s almost impossible to know if the tariffs will be completely unwound by this. But in the hypothetical situation that they are, it’s natural to see dollar appreciation.”

He added; “Trump’s tariffs will lead to stagflation pressure on the U.S. economy, so reversing those tariffs would be a positive for the dollar.”

There will still be a high degree of uncertainty, especially as there will be an impact on tax revenue which will feed through into underlying market concerns over the budget deficit.

It is highly unlikely that the Administration will drop its trade campaign and it will explore all avenues to negate any legal impact.

MUFG added; “Our best sense right now for Asia FX markets is that the knee jerk reaction seen today in Asian currencies weakening and Dollar strengthening may not last. The crucial reasons are that the tariffs on Asia are likely to stay amidst the legal battle, coupled with the legal uncertainty also potentially crimping US growth and investment plans further.”

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USD/JPY Technical Analysis

The US dollar initially shot higher against the Japanese yen and then has collapsed. There has been a lot of selling above 146 yen. The question is, can we turn things around? I still think we’re in the midst of trying to reach the bottom. But right now, it’s just so messy that it’s really difficult to get aggressive to the upside. Nonetheless, I do think that there is an opportunity on pullbacks to buy the US dollar due to interest rate differential, which is going to remain sky high, especially as the Japanese are having trouble finding buyers for their bonds again.

AUD/USD Technical Analysis

The Australian dollar is slightly positive, but it’s still just messy sideways trading, really, when you look at this. The 200 day EMA is relatively flat and offers a little bit of support, but the 0.64 level is even more important. Underneath there you have the 0.635 zero level, which should offer support. Clearing both of those to the downside probably opens a trap door trade against the Aussie where we just fall off of a cliff. On the other hand, if we can turn around a break above the 0.65 level, that allows the Australian dollar to go much higher. We did peak above there on Monday, but Monday, of course, was Memorial Day, meaning that there was a serious lack of liquidity.

For a look at all of today’s economic events, check out our economic calendar.

The EURJPY pair kept positive stability, taking advantage of forming extra support at 163.35 level, to begin achieving some of the gains by its rally towards the initial target by hitting 164.20 level.

The positive factors are represented by the continuation of forming main support at 162.00 level, and providing positive momentum by the main indicators, so that confirms the continuation of the positivity, which might target 164.80 level, to attempt to breach the obstacle near 165.20, to reinforce the continuation of the positivity in the upcoming period.

The expected trading range for today is between 163.30 and 165.20

Trend forecast: Bullish

• The British pound did try to rally initially during the day on Wednesday but gave back that momentum and then went falling toward the 1.3450 level.
• The 1.3450 level is an area that a lot of people will be paying close attention to, as it was the previous area of resistance that we had been fighting in April and early May.
• Now that we are approaching that level again, the question of course will be whether or not there is any “market memory” in that general vicinity.

United Kingdom and the United States

The one thing that makes the British pound a little bit different than most of the other currencies that I follow is that the United Kingdom actually has a trade agreement with the United States, so it should continue to outperform other currencies on the whole, in relation to the US dollar. Quite frankly, this should facilitate more trade between the Americans and the British, which should be a good thing for the United Kingdom, as well as the United States. In this currency pair, we see markets focusing on the interest rate path of both currencies and central banks, and they are about as even as it gets right now, so there’s not a lot to push the markets around.

That being said, you should keep in mind that the US dollar strengthening around the world will have a bit of a “knock on effect” in this market, as it doesn’t operate in a vacuum. This doesn’t mean that the British pound has to meltdown that the US dollar strengthens against other currencies, it just made a “fall less.” This is exactly what we saw last year, so even if this market does break down, I’m not necessarily too excited to short the British pound, not what I kid short something like the euro.

Because of this, I’ll be watching the 1.34 level closely. If that breaks down and we start dropping below there, I probably will short other currency pairs such as the EUR/USD, NZD/USD, and go long in other pairs like USD/CAD, and the USD/CHF pair. It’ll be interesting to see how this plays out, but ultimately, I think we’ve got a situation where the GBP/USD pair could very well end up being a tertiary indicator for other trading.

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Christopher Lewis has been trading Forex and has over 20 years experience in financial markets. Chris has been a regular contributor to Daily Forex since the early days of the site. He writes about Forex for several online publications, including FX Empire, Investing.com, and his own site, aptly named The Trader Guy. Chris favours technical analysis methods to identify his trades and likes to trade equity indices and commodities as well as Forex. He favours a longer-term trading style, and his trades often last for days or weeks.