Above: U.S. Trade Representative Jamieson Greer speaks in Geneva. Image: Pound Sterling Live.
The Dollar looks constructive for the week ahead.
The Pound to Dollar exchange rate (GBP/USD) dropped by a per cent at the start of the new week as markets welcomed news that China and the U.S. agreed to cut tariffs on imports from one another.
Statements issued by both sides in Geneva on Monday showed an agreement to temporarily lower tariffs on each other by 115% for 90 days.
This follows unexpectedly rapid progress in negotiations held in Switzerland over the weekend that has apparently caught markets off guard.
The Dollar is a standout winner as the 'sell America' trade of 2025 reverses as investors see a more benign economic outlook and a tamed Donald Trump who has ultimately retreated from the punitive tariffs set out on April 02.
The GBP/USD exchange rate is lower by a per cent at 1.3164, its lowest level since April 14 and the near-term outlook advocates for further weakness.
U.S. trade representative Jamieson Greer told journalists in Geneva that both the U.S. and China had agreed to lower the "reciprocal" element of tariffs announced by Donald Trump during his April 02 'liberation day' last month.
Both sides had agreed to cut the 125% "reciprocal" tariffs on imports from each other to 10%, while the Trump administration’s 20% tariffs related to fentanyl remained in place.
The Dollar can extend gains as markets see the prospect for further progress in talks. "We have a mechanism for continued talks," said U.S. Treasury Secretary Scott Bessent.
Above: GBP/USD at daily intervals, showing scope for a pullback to extend.
Looking at the charts, momentum has turned away from the GBP/USD and further downside is likely now that the pair has broken below the nine-day exponential moving average.
Momentum as measured by the Relative Strength Index (RSI) is also advocating for further near-term losses as it has reached 47 and is pointed lower.
Tactically, a significant build-up in short Dollar positions must also be allowed to wash out, which means there is ample scope for the current USD rebound to extend.
To be sure, the broader trend in GBP/USD is still higher, but we are likely entering a phase of retracement and consolidation, which suggests the 2025 peak won't be challenged for a good while yet.