The GBP/USD pair traded lower near 1.3345 during Monday’s early Asian session, as the US Dollar (USD) strengthened against the Pound Sterling (GBP) amid ongoing trade concerns. Market attention remains on escalating US-China tensions, with US President Donald Trump threatening fresh tariffs, while the Bank of England (BoE) external member Catherine Mann is scheduled to speak later on Monday. The US market is closed for Columbus Day.
US-China trade tensions weigh on sentiment
Trump’s threat on Friday to impose 100% tariffs on Chinese goods from November 1 continues to weigh on market sentiment. Beijing responded by defending its export restrictions on rare earth elements and equipment, but it stopped short of imposing new tariffs on US products. The uncertainty surrounding the trade dispute between the world’s two largest economies may create volatility for the USD and the GBP/USD pair.
Jan Hatzius, chief economist at Goldman Sachs, noted that “recent policy moves suggest a wider range of outcomes than was the case ahead of prior US-China talks, with the possibility of greater concessions but also a risk of substantial new export restrictions and higher tariffs, at least temporarily.”
UK fiscal policy and employment data to cap upside
Upside for GBP/USD may be limited by expectations that UK Chancellor Rachel Reeves will raise taxes in the upcoming Autumn Statement to tackle rising fiscal debt. Such measures could weigh on household sentiment and restrict the Cable’s recovery.
Traders will also monitor the UK employment data for the three months ending in August, scheduled for release later on Tuesday. Signs of weakening labor market conditions could generate further selling pressure on GBP/USD in the near term.
