GBP/USD Plummets Below 1.2950 Amidst Rising Risk Aversion
April 4, 2025 – By Christian Borjon Valencia
The British Pound (GBP) has experienced a significant decline against the US Dollar (USD), falling below the 1.2950 mark as traders exhibit heightened risk aversion. The currency pair, GBP/USD, traded at approximately 1.2947 on Friday, marking a notable drop of more than 1% after hitting a daily high of over 1.31 earlier in the session.
China’s Tariff Announcement Drives Market Sentiment
This sudden plunge in the Pound can be attributed to recent geopolitical developments. China’s government announced the imposition of a staggering 34% tariff on all US goods, positioning this move as retaliation for US President Donald Trump’s recent policy decisions. The announcement has jolted investor sentiment, leading to a flight towards safer assets. In this environment, traders have increasingly turned to the US Dollar, Japanese Yen, and Swiss Franc, recognizing them as safer havens amidst rising stress in market conditions.
Positive US Employment Data Fuels Dollar Strength
Adding to the negative sentiment surrounding the GBP, U.S. Nonfarm Payroll data released for March exceeded analyst expectations significantly. The jobs report indicated a rise to 228,000 new jobs, markedly outpacing the anticipated figure of 135,000 and surpassing the previous month’s total of 151,000. However, it’s worth noting that the unemployment rate saw a slight uptick from 4.1% to 4.2%, a change described as "mostly a rounding error" by Bloomberg. Nevertheless, the overall employment report provided a robust tailwind for the US dollar, further weakening the Pound.
Market Predictions and Bank of England Outlook
Market participants are closely monitoring the potential implications of the current geopolitical climate on future interest rate movements. Expectations surrounding the Bank of England (BoE) have shifted, with projections now pointing towards a possible three rate cuts within 2025. This forecast comes in response to the increased uncertainty and market volatility.
Investors and analysts are also looking ahead to a speech by Federal Reserve Chair Jerome Powell, which is anticipated for next week. In the UK, key data releases are on the radar, including GDP figures and housing market data, which could further influence the Pound’s trajectory.
Technical Analysis: GBP/USD Recent Movement
The technical outlook for GBP/USD suggests challenges ahead. A reversal observed on Friday could prompt the pair to test the critical support level around 1.2900. Should the daily closing price remains below this level, further declines might expose the 200-day Simple Moving Average (SMA) at 1.2810, followed closely by the 50-day SMA at 1.2726. Meanwhile, the Relative Strength Index (RSI) has notably dropped from about 70 to 54, indicating growing bearish momentum in the market.
On the bullish side, purchasers of the Pound must generate enough market buying pressure to keep the pair above the 1.29 mark. Maintaining levels above the April 3 low of 1.2968 could help facilitate testing the psychological barrier of 1.30. Wrap-Up
As of this week, the overall performance of the British Pound against other major currencies reflected its vulnerabilities. In the currency heat map, GBP has shown mixed changes, with notable strength against the Australian Dollar but weaknesses elsewhere, particularly against the Greenback and Japanese Yen.
As the markets brace for further developments, participants remain vigilant, striving to navigate an increasingly complex economic landscape defined by shifting geopolitical tensions and evolving central bank policies. Investors are advised to remain cautious and observant as the unfolding dynamics continue to influence currency trading strategies in the coming weeks.
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