Pound Sterling edges higher against US Dollar as Trump unveils new tariff rates for 14 nations

• The Pound Sterling ticks higher against the US Dollar as Trump threatens new tariffs reates on nations that failed to ink a trade pact with Washington.

• US President Trump imposes 25% tariffs on Japan and South Korea,but delays their implementation until August 1.

• Investors await the FOMC minutes and the UK monthly GDP data for May.

The Pound Sterling (GBP) ticks up to near 1.3630 against the US Dollar (USD) on Tuesday. The GBP/USD pair edges higher as the US Dollar retraces after posting a fresh weekly high, following the announcement of fresh tariff rates by United States (US) President Donald Trump on key 14 trading partners.

At the time of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, trades cautiously around 97.35.

On Monday, US President Trump sent letters to 14 countries dictating tariff rates for nations that have failed to strike a trade deal with Washington during the 90-day tariff extension. Notably, the White House slapped 25% tariffs on imports from Japan, with whom Washington has been negotiating actively in the past few weeks.

Meanwhile, Japanese Prime Minister Shigeru Ishiba said  that Tokyo would continue to negotiate with the US to seek a mutually beneficial trade deal, Reuters reported.

After sending letters to his trading partners, US President Trump warned through a post on Truth.Social that any sort of retaliation would be followed by a similar increase in import duties. Despite the threats of tariffs, Asian markets trade higher on Tuesday as Trump left the door open for additional trade negotiations until August 1, when the new tariffs would come into force.

Persistent uncertainty surrounding Trump’s tariff policy is expected to keep the US Dollar on the back foot. Market experts struggle to gauge the impact of the US tariff policy on American and global growth outlook.

Daily digest market movers: Pound Sterling underperforms risky peers

The Pound Sterling trades higher against safe-haven currencies due to the risk-on sentiment seen in markets,, but underperforms against its more risky peers on Tuesday. The British currency is expected to remain on the back foot due to the overhang of mounting fiscal risks in the United Kingdom (UK) following the presentation of a higher welfare spending bill by the Labour government before the House of Commons last week.

The welfare bill announced showed an increase in the standard allowance for Universal Credit (UC), which is expected to raise the debt financial burden by £4.8 billion by fiscal year 2029-2030.. This led to investors dumping UK gilts as the bill raised financial risks.

Meanwhile, Chancellor of the Exchequer Rachel Reeves has confirmed that the government would fund the additional financial burden, but didn’t clarify whether it will be through tax increases or spending cuts. "Of course, there is a cost to the welfare changes that Parliament voted through this week and that will be reflected in the Budget," Reeves said.

On the monetary policy front, traders are becoming increasingly confident that the Bank of England (BoE) will reduce interest rates in the August policy meeting. In the June meeting, the BoE held key borrowing rates steady at 4.25%, but suggesting that interest rates are likely to decline.

This week, investors will focus on the UK monthly Gross Domestic Product (GDP) and factory data for May, which are scheduled to be released on Friday. The UK GDP is expected to have grown by 0.1% after declining by 0.3% in April.

In the US, investors await the Federal Open Market Committee (FOMC) minutes of the June 17-18 policy meeting, which will be published on Wednesday. In the policy announcement, the Federal Reserve (Fed) kept interest rates steady for the fourth straight time in the range of 4.25%-4.50%.

During the policy announcement, Fed Chair Jerome Powell stated that monetary policy adjustments aren't on the cards until officials get clarity on how much the tariff policy will impact inflation and economic growth.

Technical Analysis: Pound Sterling strives to hold 20-day EMA

The Pound Sterling moves slightly higher to near 1.3630 against the US Dollar on Tuesday. The GBP/USD pair strives to hold the 20-day Exponential Moving Average (EMA), which trades around 1.3600. A downside move by the pair below the same would turn the near-term trend to bearish.

The 14-day Relative Strength Index (RSI) hovers slightly above 50.00, suggesting that the bullish momentum has faded.

Looking down, the psychological level of 1.3500 will act as a key support zone. On the upside, the three-and-a-half-year high around 1.3800 will act as a key barrier.