Pound-to-Dollar Rate Jumps as Tariff Fears Dent USD

June 2, 2025 - Written by David Woodsmith

STORY LINK Pound-to-Dollar Rate Jumps as Tariff Fears Dent USD

Pound Sterling Rallies Against the U.S. Dollar as Trade War Fears Intensify

The Pound to Dollar exchange rate (GBP/USD) posted strong gains on Monday as simmering trade tensions fuelled fears of stagflation in the US.

At the time of writing, GBP/USD was trading at $1.3548, up more than 0.7% since the start of the session.

The US Dollar stumbled at the start of the week as renewed trade hostilities between the US and China reignited fears of an economic downturn in the US.

Tensions flared after President Donald Trump accused Beijing of backtracking on prior tariff agreements. The two nations had previously committed to scaling back tariffs by 115% in an effort to ease a trade war, but that truce now appears to be fraying.

China’s Ministry of Commerce responded swiftly on Monday, issuing a strongly worded statement condemning what it described as continued economic aggression from Washington:

‘The U.S. government has unilaterally and repeatedly provoked new economic and trade frictions, exacerbating uncertainty and instability in bilateral economic and trade relations.’


The war of words followed Trump’s announcement on Friday that he intends to double tariffs on steel and aluminium imports, raising them from 25% to 50%.

Economists warn that these protectionist measures could deal a blow to the US economy, pushing up import prices and fuelling fears of stagflation – a toxic mix of high inflation and sluggish growth.

Unsurprisingly, investor jitters translated into heavy pressure on the greenback, which opened the week on the back foot.

The Pound (GBP) traded with little conviction to start the week, as a lack of major UK economic data kept the currency largely rangebound.

The only notable release was the UK’s final manufacturing PMI, which came in slightly higher than its earlier estimate. However, the uptick did little to inspire confidence, with the index still firmly in contraction territory for the second month running. As such, the data was largely shrugged off by markets.

Despite the muted domestic backdrop, Sterling managed to climb sharply against the ‘Greenback’. The Dollar’s broad-based weakness handed GBP/USD an opportunity to rally, even as the Pound traded sideways elsewhere.

The UK’s relative detachment from intensifying global trade tensions may also have helped shield the Pound from volatility.


Looking ahead, the US Dollar could remain on the defensive on Tuesday if a slate of upcoming economic data confirms signs of a cooling US economy.

Economists are forecasting a drop in job openings for April, alongside a steep 3% fall in factory orders. These figures could reinforce concerns about weakening demand and slowing momentum in key sectors. Should these predictions materialise, the ‘Greenback’ may face further downside pressure as recession fears resurface.

For the Pound, attention turns to Wednesday’s final UK services PMI. As the UK’s dominant economic sector, any confirmation that services activity edged back into growth territory last month could give Sterling a modest boost.

Until then, with little domestic data to drive direction, the Pound may take its cues from broader risk sentiment. If markets sour, the increasingly risk-sensitive currency could find itself on shakier ground.

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TAGS: Pound Dollar Forecasts