The GBP/USD pair is again under pressure due to the broad strengthening of the U.S. dollar. Last week, the pound attempted to break into the 1.34 zone in reaction to the Bank of England's May meeting results and the announcement of a trade deal between Washington and London. However, this attempt failed — after reaching 1.3401, the pair returned to the 1.3230–1.3320 price range and entered a sideways drift. Today, news emerged that the U.S. and China have agreed to a three-month trade truce (with China reducing tariffs from 125% to 10%, and the U.S. from 145% to 30%), significantly boosting the dollar's position across the market.
However, even without the U.S.–China truce, other factors are weighing on the pound. The seemingly positive fundamental factors for the British currency had flaws, preventing GBP/USD buyers from developing a sustained upward trend. For example, while the market initially reacted positively to the news of a U.S.–UK trade agreement, it later became clear that the deal has not yet been formally signed — the details are still under discussion and will take weeks to finalize. Moreover, it was revealed that the U.S. does not intend to lower tariffs on British goods below 10%. Washington stated it was willing to reduce tariffs on UK car exports — but only to 10% (from the current 27%).
In other words, traders were initially excited by the attractive presentation but were disappointed by the actual content of a deal that wasn't finalized; only preliminary arrangements existed.
This is precisely why GBP/USD buyers failed to hold above the 1.3400 target. The Bank of England also sent mixed signals by delivering a "hawkish cut" to interest rates. On one hand, the BoE lowered the rate by 25 basis points; on the other, it made it clear it wouldn't accelerate monetary easing. In response to a journalist's question, BoE Governor Andrew Bailey said interest rates are not set "on autopilot." Moreover, the GDP growth forecast for this year was revised upward — from 0.75% (February estimate) to 1.0%.
This makes the upcoming economic releases particularly significant for the GBP/USD pair. If the data reflect resilience in the UK economy, the pound will gain support amid fading dovish sentiment. Conversely, weak macro indicators will put further pressure on the pair.
Tomorrow, May 13, we will get key labor market data from the UK. According to preliminary forecasts, the unemployment rate is expected to rise to 4.5%. It has held at 4.4% for the past four months, so even a slight increase could pressure the pound. Additionally, the number of jobless claims — another component of the report — may also weigh on the pound. This figure has risen steadily for the past three months (2.8K in January, 16.5K in February, and nearly 19K in March). Analysts expect a further rise in April, by 22.3 K. This could indicate a developing negative trend. Meanwhile, wage growth is expected to slow to 5.2% from 5.6%.
If all components of the report meet or fall below expectations (let alone enter the "red zone"), it would signal a cooling labor market and likely amplify dovish sentiment among traders. Such an outcome would put additional pressure on the British currency.
However, the most important release of the week for the pound will come on Thursday, May 15. On that day, we'll learn the GDP growth data for March. Forecasts suggest the economy showed zero growth (compared to a modest 0.5% increase in February). Additionally, quarterly GDP data will be published. On a quarterly basis, GDP is expected to rise by 0.6% (after 0.1% growth in Q4 2024), and on an annual basis, the reading should come in at 1.6% (up from 1.5% previously).
Once again, the market's reaction will depend on the "tone" of this release (particularly the quarterly data). If the labor market and GDP reports disappoint, GBP/USD sellers could initiate a sustained decline toward the 1.30 zone, especially given the broader dollar strength. However, if the data exceeds expectations, buyers may stage a significant correction (toward the 1.32 area), especially after the initial euphoria around the U.S.–China trade truce fades. After all, a 90-day truce does not end the trade war, and negotiations could end in success or failure. Therefore, while loud geopolitical headlines may overshadow these macro reports, they remain significant, and under the right conditions (if they land in the "green zone"), they may still have a noticeable impact.
However, the GBP/USD pair is entirely under the influence of the greenback, which has become the primary beneficiary of the current situation. Sellers are now testing the support level 1.3270 (the lower line of the Bollinger Bands on the D1 timeframe). If the bears break through this level, the next downside target will be 1.3070 (the Kijun-sen line on the daily chart).
