Sterling is fractionally lower on the day, at 1.3312, but appears poised to test and surpass this week's 2025 high at 1.3423 if global tariff tensions ease and market focus shifts back to inflation and interest rate expectations.

Cable's recent strength was driven in part by President Donald Trump’s criticism of Federal Reserve Chair Jerome Powell’s cautious policy stance, given tariff-related growth and inflation concerns.

While tensions between the two have cooled, markets remain volatile. Still, a return to fundamentals could support further GBP/USD gains — though the macro landscape remains fluid given Trump’s shifting rhetoric on both tariffs and the Fed.

For now at least, global markets have rallied and despite continued tariff-driven noise, a renewed focus on inflation and growth could keep cable trending higher.

Bank of England Governor Andrew Bailey noted Thursday that UK growth faces pressure from Trump’s tariffs but the BoE does not expect a recession. Bailey also expects any inflation rise in the second half of this year to be transitory.

With the BoE sticking to a data-driven, inflation-focused approach despite slowing growth, UK policy is likely to stay aligned with the Fed. This should keep sterling near its trend highs.

However, a renewed push from Trump against the Fed — or a ramp-up in tariff measures — could drive GBP/USD to new 2025 highs, with 1.3643, the early February 2022 peak, in view.
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(Paul Spirgel is a Reuters market analyst. The views expressed are his own)