GBP/USD rebounds as sentiment rebounds after tariff delay, exploring further upside

GBP/USD tested gains on Wednesday, climbing back above the 1.2800 mark following a full recovery in broad market sentiment. The Trump administration has again departed from its "no exceptions, no delays" tariff policy and postponed the tariffs again, this time for 90 days.

Global markets reacted strongly, surging across the board, although bullish demand for the pound remained limited, rising just 0.3%. U.S. President Trump still has a 10% "reciprocal" tariff in place on most trading partners. The White House has given most trading partners time to negotiate tariff levels that were initially calculated by dividing imports by U.S. exports. However, the Trump administration has still raised tariffs on Chinese goods to 125% in retaliation for China's 84% tariff on U.S. goods, which will almost entirely affect U.S. agriculture.

Interest rate markets have largely moved away from rate cut expectations, with interest rate swap traders now pricing in a 75 basis point rate cut from the Federal Reserve over the rest of the year. Rate markets are still betting the next 25 basis point rate cut will come in June, however analysts at JPMorgan Chase & Co. warned that the Fed is more likely to be stuck in a wait-and-see cycle until at least September due to tariff uncertainty.

The rest of this week’s trading is all about US data: US Consumer Price Index (CPI) inflation data is due on Thursday, while US Producer Price Index (PPI) inflation and the University of Michigan (UoM) Consumer Confidence Survey results are both due on Friday. This will be the last wave of key US inflation and confidence data for the 2025 “pre-tariff” period, providing key gauges for the remaining calendar years.