The British pound experienced a significant rise against the US dollar in 2025 (GBP/USD), reaching its highest levels in seven months. This performance is attributed to a combination of economic and political factors affecting both currencies. In this article, we will review the main reasons for this rise, analyze the impact of monetary and trade policies in the UK and the US, and forecast the future exchange rate between the pound and the US dollar.
GBP/USD Performance
In April 2025, the GBP/USD pair rose to levels not seen in seven months, surpassing the 1.34 barrier. This rise was attributed to weakness of the US dollar, which was affected by political pressure on the US Federal Reserve, especially after President Trump’s statements that raised concerns about central bank’s independence.
UK Economic Factors
Despite the economic challenges facing the UK, including slowing economic activity and a rising budget deficit, the pound has demonstrated remarkable resilience. Data indicates that the British economy grew by 1.5% in 2024, exceeding previous expectations. Expectations also indicate that the Bank of England may move towards gradually reducing interest rates, which could affect the pound’s future performance.
Monetary Policies in the United States
In contrast, the US dollar was affected by President Trump’s economic and trade policies, particularly the imposition of tariffs on some imports, which led to trade tensions with major partners like China. This escalation in trade wars increased uncertainty in global markets, prompting investors to seek safe havens, thus reducing demand for the dollar.
The Impact of Political Tensions on Markets
President Trump’s remarks regarding Federal Reserve Chairman Jerome Powell raised investor concerns about the stability of US monetary policy. This political interference in the central bank’s policies led to a decline in confidence in the US dollar, contributing to the rise of the British pound.
Future Exchange Rate Expectations
Expectations indicate that the British pound may face pressure in the first half of 2025, especially if the Bank of England continues to cut interest rates. However, political and economic tensions in the United States may continue to negatively impact the US dollar, potentially supporting the pound in the medium term.
Political Pressures Weaken the Dollar and Confuse Markets
The dollar’s losses on Tuesday extended a broad decline that began at the beginning of the week. The dollar fell sharply after US President Donald Trump criticized Federal Reserve Chairman Jerome Powell. Trump publicly attacked the central bank for its “slowness” in cutting interest rates, sparking widespread controversy in economic circles. This attack was the latest in a series of political pressures that began days ago and have gradually escalated.
Kit Juckes, senior foreign exchange analyst at Société Générale, believes that protectionist policies increase the risk of inflation. He explained that imposing tariffs on goods for which there are no domestic substitutes will lead to higher prices. He added that the United States lacks the production capacity to replace these goods, which increases inflationary pressures. And He emphasized that these policies will negatively impact long-term economic growth.
Moreover, Gox pointed out that political interference in the Fed’s decisions has increased uncertainty. He said that the accumulation of imbalances in international investment flows poses a major structural risk. And He described this as a persistent imbalance since the end of the Bretton Woods system, leaving the dollar vulnerable to sharp declines. He added that these factors combined constitute a “surefire recipe” for a sustained decline in the value of the US dollar.
Market reports indicate that the White House is pressing hard to change the current interest rate policy. This political pressure has worried traders, especially given signs of a return to inflation.
The British pound is heading higher as the market swells.
The GBP/USD pair remained close to its seven-month highs and continued its advance during European and North American trading on Tuesday. It approached a breakout of the key resistance level at 1.3427, according to technical charts. This level coincides with the 78.6% Fibonacci retracement of the downtrend from June 2021 to September 2022.
Conversely, the US dollar remained weak against most major currencies, despite the stabilization of the Treasury market after thin liquidity on Easter Monday. This suggests growing upward pressure for a sharp breakout.
“Trump is saying what Fed analysts are saying, but in a crude way,” said Michael Ivry, an expert at Rabobank. He added that politicians’ criticism of an independent central bank is not tolerated in the same way that analysts and investors are. He believes this reflects an imbalance in the current liberal global order.
Political pressures weaken the dollar and confuse markets
The dollar’s losses on Tuesday extended a broad decline that began at the beginning of the week. The dollar fell after Trump criticized Federal Reserve Chairman Jerome Powell over high interest rates. These statements were part of a series of pressures that began a week ago.
Kit Juckes, senior currency strategist at Société Générale, believes that tariffs are fueling inflation. He explained that imposing them on goods with no domestic substitutes will increase costs. And He pointed out that the United States lacks the production capacity to compensate for the shortage, which weakens growth. He emphasized that political interference in Federal Reserve policy is compounding the uncertainty. Juckes described the situation as a recipe for a sharp decline in the value of the dollar.
Investors expressed concern about the possibility of a strong return of inflation. They also fear further declines in US markets. With headwinds hitting US assets, market tensions are rising.
Markets fell as investors realized the impact of tariffs on corporate earnings.
She added that there is speculation about a sell-off of US bonds by large foreign accounts. She emphasized that the mere existence of such speculation puts pressure on the market, regardless of its actual realization.
These concerns came after the shock announcement of Trump’s tariffs on what was dubbed “Liberation Day.” The announcement was followed by a sharp decline in stocks, bonds, and the US dollar.
Markets fell as investors realized the impact of the tariffs on corporate earnings. It became difficult to justify high stock valuations, as no financial models could support these prices amid such tensions.
He pointed out that the sharp decline in long-term Japanese bonds demonstrates a shift in traditional dynamics. He questioned the continued dominance of the dollar as the global reserve currency.
Meanwhile, pressure on the Chinese currency increased after Trump’s tariff announcement. This prompted the People’s Bank of China to intervene and adjust the central bank’s renminbi exchange rate.
The bank held the USD/Yen rate at a slightly higher level on Tuesday. The yuan fell 19 basis points to 7.2074, pushing the pair higher. The USD/CNY pair rose 0.15% to 7.3070 after the peg announcement. The market had been anticipating a stronger yuan peg following Monday’s dollar weakness.
Ying of CIBC explained that this had sparked fresh upward momentum for the pair. She noted that Chinese intervention was aimed at mitigating the impact of the weaker dollar on their currency.
An analysis of the GBP/USD performance in 2025 shows that economic and political factors play a crucial role in determining currency market trends. While the UK faces economic challenges, political tensions in the US may continue to impact the US dollar. Therefore, it is important for investors to monitor economic and political developments in both countries to make informed investment decisions.
