GBP/USD Forecast: Pound Sterling Falls vs Dollar as Tariff Jitters Hit Markets

July 7, 2025 - Written by David Woodsmith

STORY LINK GBP/USD Forecast: Pound Sterling Falls vs Dollar as Tariff Jitters Hit Markets

The Pound US Dollar exchange rate (GBP/USD) weakened on Monday as Donald Trump’s looming tariff deadline soured market sentiment.

At the time of writing, GBP/USD was trading at $1.3595, down around 0.3% on the day.

The US Dollar (USD) made gains on Monday, buoyed by a wave of risk aversion that swept through global markets in anticipation of Donald Trump’s looming tariff deadline.

The US President had previously pushed back the implementation of his so-called ‘reciprocal’ tariffs to allow room for negotiations, but the grace period ends on Wednesday. With many nations still without agreements in place, investors grew increasingly jittery.

Adding to the tension, Trump warned that countries choosing to align with the BRICS bloc of emerging economies could face even steeper trade penalties.

Posting on Truth Social, Trump declared:

‘Any Country aligning themselves with the Anti-American policies of BRICS, will be charged an ADDITIONAL 10% Tariff. There will be no exceptions to this policy. Thank you for your attention to this matter!’

The renewed threat of tariffs dampened risk appetite across markets, driving investors towards the relative safety of the US Dollar and lending it fresh momentum to start the week.

The Pound (GBP) came under pressure on Monday, as the prevailing risk-off sentiment weighed on the increasingly risk-sensitive currency. Still, Sterling managed to hold up better than some counterparts, partly shielded by the UK’s existing trade agreement with the US, which helped soften concerns over looming American tariffs.

Even so, domestic issues continued to cloud the outlook for the Pound. With no major UK data releases to drive momentum, investors remained focused on political developments at home. Last week, the UK government was forced into an embarrassing climbdown on planned welfare cuts, after signs of a brewing rebellion among Labour backbenchers.

This U-turn not only cast doubt on the administration’s authority to push through tough fiscal measures but also fuelled speculation that tax rises could be on the cards in the autumn to plug the gap, unsettling markets already wary of the UK’s fragile public finances. As a result, the Pound lacked support on Monday.

Looking ahead, a sparse data calendar for both the Pound and the Dollar in the coming days means broader market sentiment is set to take the driver’s seat for the GBP/USD pair.

Much of the focus will be on developments surrounding Trump’s tariff agenda. If nerves persist over the prospect of sweeping ‘reciprocal’ tariffs – or the threat of extra levies on BRICS-aligned nations – investors could continue to favour the safe-haven US Dollar, pushing Sterling lower.

On the other hand, any signs of progress on trade talks, unexpected compromises or a decision to delay implementation could lift global risk appetite, offering the Pound some relief against the ‘Greenback’.


Either way, with markets on edge over trade policy, the stage looks set for heightened volatility, leaving GBP/USD vulnerable to sharp swings.

International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.

TAGS: Pound Dollar Forecasts