Pound-to-Dollar Rate Slips Almost 1% Following US China Trade Breakthrough

May 12, 2025 - Written by Ben Hughes

STORY LINK Pound-to-Dollar Rate Slips Almost 1% Following US China Trade Breakthrough

The Pound to US Dollar (GBP/USD) exchange rate tumbled out of the gates this week, slipping to a one-month low on Monday in response to a major easing of US-China trade tensions.

At the time of writing, GBP/USD was trending at $1.3201. Down around 0.7% from Monday’s opening levels.

The US Dollar surged on Monday after the US and China unexpectedly agreed to a temporary truce in their recent trade dispute.

Following high-level discussions in Geneva over the weekend, both sides agreed to a 90-day halt on new tariffs, coupled with a mutual reduction of existing duties by as much as 115%.

The news sent shockwaves through markets and catapulted the US Dollar higher on hopes the de-escalation of tensions could help the US to avoid slipping into a recession.

Russ Mould, investment director at AJ Bell, commented:

‘While the trade spat has only been dialled back for 90 days, it’s a major breakthrough as far as investors are concerned. The fact the two countries were talking was already a major win given they’ve been at each other’s throats during the first and second Trump presidential terms.’


USD investors were also hopeful that if the US and China could reach an agreement, then deals with other US trade partners could also be reached relatively swiftly.

Despite a sharp drop against the US Dollar, the Pound held relatively steady elsewhere on Monday, supported by a broadly upbeat market mood.

Sterling sentiment was lifted by anticipation of an updated UK-EU trade partnership, as well as progress in bilateral deals with both India and the US.

Still, these developments weren’t enough to offset the Pound’s losses against the surging Greenback, particularly as investors remained cautious ahead of key UK data releases later in the week.

Looking to Tuesday, the spotlight will be on the release of the latest US inflation figures.

If April’s consumer price index reports a rise in inflation, it could extend the downside in the Pound US Dollar exchange rate, especially as it would appear to support the Federal Reserve’s more hawkish outlook on policy.

On the UK side, the UK’s latest jobs report may add pressure to the Pound.


Economists are predicting a slight uptick in unemployment and a slowdown in wage growth, which could reinforce expectations that the Bank of England (BoE) may move towards cutting rates.

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TAGS: Pound Dollar Forecasts