GBP/USD weakens below 1.3400 on easing trade tensions

• GBP/USD softens around 1.3390 in Tuesday’s Asian session. 

• Trump said additional 100% tariffs on imports from China won’t be sustainable.

• Traders brace for the UK September CPI inflation report, which will be released later on Wednesday. 

The GBP/USD pair extends the decline to near 1.3390 during the Asian trading hours on Tuesday. The US Dollar (USD) strengthens against the Pound Sterling (GBP) on easing US-China trade tensions. Traders will closely watch the UK September Consumer Price Index (CPI) inflation data, which is due later on Wednesday. 

Market sentiment improved as US-China trade tensions eased after US President Donald Trump on Friday said that his proposed 100% tariff on goods from China would not be sustainable. Nonetheless, Trump blamed Beijing for the latest impasse in trade negotiation that began with Chinese authorities tightening control over rare-earth shipments. 

Trump’s softened tone and his confirmation to meet Chinese President Xi Jinping provide some support to the Greenback and create a headwind for the major pair. US Treasury Secretary Bessent said the US and China will hold talks this week in Malaysia to prepare for Trump’s meeting with Xi later this month on the sidelines of the Asia-Pacific Economic Cooperation conference in South Korea. 

The UK CPI data will be closely watched as it might offer some hints about whether the Bank of England (BoE) will cut interest rates again in the remaining year. Persistent inflation is a key reason for the cautious approach to further rate cuts.  BoE Governor Andrew Bailey emphasized last month that the UK central bank was "not out of the woods yet" on inflation.

The headline UK CPI is expected to show a rise of 4.0% YoY in September, while the core CPI is projected to show an increase of 3.7% YoY during the same period. Any signs of persistent inflation pressures could prompt traders to scale back expectations for rate cuts and lift the Cable against the USD in the near term.