February 20, 2025 – Written by Ben Hughes

STORY LINK GBP/USD Forecast: Pound Sterling Buoyed on Possible China Trade Deal

The Pound Sterling trended higher versus the US Dollar on Thursday morning as investors weighed fresh comments from US President Donald Trump regarding a potential trade agreement with China.

At the time of writing, the Pound to Dollar exchange rate (GBP/USD) was trading at approximately $1.2614, up around 0.2% from Thursday’s opening levels.

The US Dollar (USD) weakened on Thursday after President Trump suggested the possibility of reaching a new trade deal with China.

Speaking late Wednesday, Trump indicated that a new trade agreement with Beijing is ‘possible’ and hinted at a potential visit from Chinese President Xi Jinping to discuss a deal.

This follows speculation in US media that Trump is aiming to secure a more expansive trade pact with China, fueling optimism that tensions between the two economic superpowers could ease.

However, limiting losses for the US Dollar were Trump’s continued threats to impose 25% tariffs on key imports, including vehicles, semiconductor chips, and pharmaceuticals.

Further cushioning USD’s downside was the release of minutes from the Federal Reserve’s latest policy meeting, in which officials reaffirmed their cautious stance on rate cuts.

Despite making gains against the US Dollar, the Pound (GBP) struggled to build momentum against other major currencies.

Concerns over the UK’s economic health kept Sterling’s upside potential in check, particularly after a new report highlighted a significant drop in consumer confidence.

Households appear increasingly wary of rising living costs, with spending expectations falling in response to fears of further price hikes following the government’s latest Budget.

Looking ahead to the end of the week, the Pound-to-Dollar exchange rate could be influenced by upcoming UK economic data.

Friday’s session kicks off with the UK’s retail sales figures, which are expected to show a recovery in consumer spending last month.

This will be followed by the release of the UK’s PMI data, with a stronger-than-expected acceleration in private sector growth likely to support Sterling.

Meanwhile, the latest US S&P PMIs could influence USD movement later in the session. If the February figures mirror the weak performance seen in January, the US Dollar may struggle to regain ground.

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TAGS: Pound Dollar Forecasts