The British pound (GBP) strengthened against the U.S. dollar (USD) during the European trading session on Thursday, with the GBP/USD exchange rate holding firm above 1.3550. This comes as the U.S. dollar continues to struggle following disappointing U.S. economic data released earlier in the week.
U.S. Dollar Under Pressure
The U.S. Dollar Index (DXY), which measures the greenback against six major global currencies, hovered near a six-week low of 98.60, set on Tuesday. This downward pressure has largely been attributed to a weaker-than-expected performance in U.S. economic indicators and policy uncertainty under President Donald Trump’s administration.
In particular, the ADP employment report for May showed the U.S. private sector added only 37,000 jobs, significantly down from 60,000 in April and well below market expectations of 115,000. This marked the weakest employment gain since January 2021, casting fresh doubts over labor market stability.
Compounding investor concerns, the ISM Services PMI revealed an unexpected slowdown in service sector activity—a segment that comprises roughly two-thirds of U.S. economic output. Similarly, the ISM Manufacturing PMI for May indicated an accelerated contraction in industrial production.
Trade Policy Uncertainty Weighs on Sentiment
Analysts point to President Trump’s evolving trade rhetoric as a key factor behind declining business confidence. The U.S. administration’s erratic stance on tariffs has led domestic manufacturers to delay investment and expansion decisions. This week, Trump doubled tariffs on steel and aluminum to 50%, aiming to bolster domestic production but raising fears of inflationary pressures.
Rising inflation could limit the Federal Reserve’s ability to lower interest rates, further complicating the central bank’s policy outlook. In a post on Truth Social on Wednesday, Trump renewed criticism of Fed Chair Jerome Powell, urging him to cut rates in response to weak jobs data. “Powell is ‘too late’ and must cut rates now… Europe has already cut rates nine times,” Trump wrote.
Technical Outlook: GBP/USD Maintains Bullish Momentum
The GBP/USD pair maintained its upward trajectory, fluctuating around the 1.3550 level after rising on Wednesday. The currency pair continues to find support above the September 26 high of 1.3434, indicating strong buying interest at lower levels.
The 20-day exponential moving average (EMA), currently at 1.3443, is trending higher—supporting the bullish outlook.
The 14-day Relative Strength Index (RSI) remains above 60.00, reinforcing the presence of positive momentum.
Key levels to watch:
Resistance: 1.3750 (January 13, 2022 high)
Support: 1.3443 (20-day EMA)
Conclusion
As the U.S. dollar grapples with lackluster economic data and policy uncertainty, the British pound is capitalizing on the moment. The technical and fundamental landscape favors a continued bullish bias for GBP/USD, though markets will be closely watching upcoming U.S. economic releases and any further developments in trade policy or Fed communications.
Related topics:
