Created on April 03, 2025

• Amid strong upward momentum, the GBP/USD pair rose to the 1.3128 resistance level, the highest level in about six months, driven by a sharp decline in the US dollar.
• Obviously, this was due to traders’ reaction to the latest round of reciprocal tariffs announced by US President Donald Trump.
• The US is set to impose a 10% tariff on all imports, with some countries subject to much higher rates. British imports will be subject to these tariffs.

Reactions to Trump’s Tariffs

This announcement triggered a flight to safe havens and a shift towards low-risk assets, as investors grew increasingly concerned about the potential impact on the global economy. For her part, British Foreign Secretary Reynolds stated that the US is Britain’s “closest ally” and that the government’s approach is to “remain calm and committed to securing this deal, which we hope will mitigate the effects of what was announced today.”

UK inflation was a factor in the pound’s decline ahead of the US tariffs. According to forex trading, the pound fell below $1.29, its lowest level in nearly two weeks, as traders reacted to the weaker-than-expected February inflation reading and the Spring Statement. Chancellor Reeves said that UK inflation is expected to average 3.2% in 2025, up from the 2.6% forecast in October. At the same time, growth forecasts for 2025 were lowered to 1% from 2%, and public sector net borrowing is expected to fall from £137.3 billion (4.8% of GDP) this year to £74.0 billion (2.1% of GDP) by 2029-30. However, compared to the October estimate, borrowing for 2025-26 is expected to be £12.1 billion higher (0.4% of GDP).

The UK government has already announced several policy changes to restore the government’s budget, including social welfare reforms, cuts in administrative spending, and a small set of tax changes. The UK’s annual inflation rate fell to 2.8% in February, slightly lower than the expected 2.9% but in line with the Bank of England’s forecast.

Trading Tips:

The pound will remain supported for some time, but beware of profit-taking.

UK avoids Trump’s tariffs, good for the exchange rate.

The British pound is experiencing sharp fluctuations following US President Donald Trump’s announcement of a 10% tariff on British imports. The 10% tariff imposed on Britain is much more lenient than those imposed on other countries, pushing the pound higher.

Here’s a look at some of the most significant tariffs:

20% on the European Union
34% on China
46% on Vietnam
24% on Japan

According to licensed trading company platforms, the British pound is rising against most major currencies, confirming its role as a safe haven in tariff trading. The GBP/USD exchange rate is higher at 1.3120, confirming that the dollar is a complete loser. This is understandable; ultimately, US consumers and businesses bear the costs of high imports. Also, the GBP/EUR exchange rate rose to 1.1989, a rise indicating that the EU’s 20% tariffs were lower than expected. In other markets, China-related currencies, such as the Australian dollar and the New Zealand dollar, are experiencing selloffs.

Trump asked a crowd gathered in the White House Rose Garden: “They’re charging us tariffs, and we’re charging them tariffs. How can anyone be upset?” Among other things, he specifically mentioned China and the European Union. “They’re deceiving us. It’s very sad to see this. It’s pathetic.”

He said, “India is very difficult. Very difficult.”

Regarding exchange rate reactions, we reported that the British pound entered the tariff announcements as a hedge due to its relatively low exposure. This is due to Britain’s declining manufacturing base, which keeps it balanced in goods trade with the United States.

Technical Analysis for the GBP/USD pair today:

Based on the performance on the daily chart, the GBP/USD pair is witnessing a strong upward movement towards levels that confirm this shift. Technically, from the resistance levels of 1.3120 and 1.3230, technical indicators will move towards strong overbought levels. Conversely, the currency pair will not abandon its upward recovery path without moving towards the support level of 1.2880 again. Finally, the GBP/USD may remain on its upward path until the reaction to the US jobs numbers tomorrow.

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• The USD/JPY outlook remains strongly bearish after Trump’s tariffs.
• BoJ and Fed divergence, along with falling US yields, lend more support to the yen.
• Tariffs pose a threat to Japan’s export-driven economy as well, igniting further uncertainty.

The USD/JPY outlook is predominantly bearish as the yen capitalizes on safe-haven appeal due to President Trump’s sweeping trade tariffs. The pair plummeted 1.2%, marking fresh 3-week lows near 147.20 during the early Asian session. With mounting fears of a US recession, investors are fleeing to the JPY, reinforcing its strength against the US dollar.

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Riskier assets saw a broader sell-off after the latest round of Trump’s tariffs. The stocks slipped, and bond yields dipped, creating a demand for conventional safe-haven assets. The US 10Y hit a YTD low at 4.0%, reinforcing the potential for a Fed rate cut.

The ongoing divergence between the Federal Reserve and the Bank of Japan further fueled the JPY rally. While the Fed is widely expected to cut rates, BoJ remains uncertain. Previously, market participants were expecting an aggressive stance from BoJ. However, Japan’s export-driven economy may suffer as a result of recent tariffs. Still, the recent Tokyo consumer inflation figures suggest that the BoJ may retain its hawkish stance.

Despite Trump’s tariffs favoring the US dollar in the long run, the likelihood of a rate cut and the risk of a recession has undermined the Greenback. According to Wells Fargo analysts, monetary easing is expected to be more pronounced in 2025-26, which could keep the dollar defensive.

Key Events for USD/JPY

Looking ahead, traders will primarily focus on the following:

• Weekly jobless claims
• ISM Services PMI

Still, the broader focus remains on trade development and China’s potential reaction.

USD/JPY technical outlook: Sellers looking at 146.55

The USD/JPY 4-hour chart shows a gloomy picture. The price is slipping towards the key support level at 146.55. The pair lies well below the 30-period SMA, posing a risk of a deeper downside. However, the RSI value reaches 30.0, which indicates an oversold zone. Hence, corrective upside can be expected.

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On the upside, the 30-period SMA is one tough nut to crack for the buyers. Meanwhile, a strong resistance level emerges at 151.15. The path of least resistance lies on the downside.

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• EUR/USD trades at its highest level since early October above 1.1000.
• US Dollar stays under strong bearish pressure following US Pres. Trump’s tariff announcements.
• The pair turns technically overbought in the near term.

EUR/USD gathers bullish momentum in the European session on Thursday and trades at its highest level since early October above 1.1000. Although the pair’s near-term technical outlook points to overbought conditions, buyers could retain control amid the broad-based US Dollar (USD) weakness.

US President Donald Trump announced on “Liberation Day” that they will impose a 10% baseline tariff, effective April 5, on all imports to the US. The Trump administration will also impose higher reciprocal tariffs, which will go into effect on April 9, on about 60 countries they describe as “worst offenders.” The European Union will be within that list, facing 20%, tariffs.

In response, European Commission President Ursula von der Leyen said early Thursday that the US’ tariffs will be a major blow to the world economy. “We are preparing a further package of measures to protect our interests,” she added.

Investors grow increasingly concerned over the potential negative impact of the US’ new trade regime on the economic outlook. In turn, the USD suffers large losses against its major rivals. At the time of press, the USD Index was down about 1.4% on the day at 102.25.

In the second half of the day, the US economic calendar will feature weekly Initial Jobless Claims and March ISM Services Purchasing Managers Index (PMI) data. Investors are likely to ignore these releases and remain focused on trade war-related headlines.

EUR/USD Technical Analysis

The Relative Strength Index (RSI) indicator on the 4-hour chart rises toward 80, reflecting overbought conditions for EUR/USD. On the upside, 1.1040 (static level) aligns as next resistance level before 1.1100 (static level, round level).

In case EUR/USD drops below 1.1000 (static level, former resistance) and starts using this level as resistance, it could extend its correction toward 1.0950 (static level) and 1.0900 (static level, round level).

EUR/USD price surged in latest intraday trading, confirming its exit from a descending correctional price channel in the short term, while also shaking off negative pressure from the 50-candle SMA, regaining its footing amid the dominance of the main upward trend, while readying to tackle the pivotal resistance of $1.0945.