GBP/USD Stalls as Trump’s Tariffs and Policy Splits Pressure Markets

The Pound Sterling hovers near 1.3638 on July 7, 2025, caught between US-Iran tensions, US President Donald Trump’s tariff threats, and diverging Fed-BoE policies. As markets brace for trade disruptions and UK tax hikes, this analysis unpacks the forces holding GBP/USD steady and what’s next.

Dollar Gains Amid Tariff and Geopolitical Fears
US tariff announcements targeting over 100 countries by July 9, 2025, with rates up to 70% effective August 1, alongside escalating US-Iran tensions, bolstered the US Dollar. The Dollar Index (DXY) rose 0.35% to 97.35, pressuring GBP/USD, which traded flat at 1.3638 on July 7, 2025, at 07:27 PM EEST. Robust US jobs data—147,000 jobs added in June, beating 110,000 estimates, with unemployment at 4.1%—reduced Federal Reserve rate cut odds to 5% for July, with a 66% chance of a 4.00%–4.25% range by September. Safe-haven flows also lifted the yen, while EUR/USD fell 0.40% to 1.1725.

UK Faces Economic and Policy Headwinds
UK Finance Minister Rachel Reeves’ warning of tax hikes after a welfare policy reversal, combined with a 0.3% GDP contraction in April, dampened Sterling’s appeal. The Bank of England (BoE) is likely to cut rates by 25 basis points to 4.25% on August 7, with 73.81% market odds, and 53 basis points of easing expected by year-end. Upcoming UK data—BRC Retail Sales, GDP, and Industrial Production—will shape sentiment. GBP/USD holds above the 20-day Exponential Moving Average at 1.3490, but a break below 1.3434 could signal deeper declines.

Markets Brace for Broader Impacts
Tariffs and US-Iran risks could push Brent crude from $74.23 to $80–$90 if Iran’s 3.4 million bpd output falters, spiking inflation. Gold, at $3,455/oz despite a 1.03% dip, might hit $3,600 short term. The S&P 500, down 1.13% to 5,976.97, could slide to 5,100–5,400 in weeks, though energy stocks may rally. Bitcoin, at $104,343, risks falling below $100,000 short term but could reach $120,000 by 2026 as an inflation hedge. Long term, trade deals or de-escalation might lift GBP/USD to 1.3750, but persistent tensions could cap gains.

This market gridlock exposes global fragility. Nuclear talks and trade negotiations offer hope, but tariffs and conflicts loom large. Hedging with Dollar and gold counters risks, urging bold strategies to navigate a world where policy splits and geopolitical shocks redefine market dynamics.