GBP/USD weakens below 1.3300 as US Dollar rises

• GBP/USD softens to around 1.3280 in Wednesday’s early Asian session. 

• Markets react positively to Trump's de-escalation, supporting the US Dollar. 

• The US will aim for the UK to lower its automotive tariff, said the WSJ. 

The GBP/USD pair remains weak near 1.3280 during the early Asian session on Wednesday. Comments by US Treasury Secretary Scott Bessent hint at a thaw in US-China trade tensions, fueling optimism in markets and strengthening the US Dollar (USD) against the Pound Sterling (GBP). 

Scott Bessent said on Tuesday that he expects a de-escalation in US President Donald Trump’s trade war with China in the very near future. He further stated that the tariff standoff with China cannot be sustained by both sides and that the world’s two largest economies will have to find ways to de-escalate.

Additionally, Trump on Tuesday appeared to take threats to fire Federal Reserve (Fed) Chair Jerome Powell off the table after days of intensifying criticisms of the Chairman over not cutting interest rates. The optimism and de-escalation of the trade war provide some support to the Greenback.

Traders will closely monitor the developments surrounding US-UK trade talks. The Wall Street Journal reported on Tuesday that the Trump administration is preparing its terms for trade talks with the UK, aiming for London to reduce levies and other non-tariff barriers on a wide range of US goods.

The US will aim for the UK to reduce its automotive tariff from 10% to 2.5%, according to people with knowledge of a draft document the Trump administration circulated to stakeholders this week outlining goals for trade negotiation with the UK. However, any signs of uncertainty in trade policy could undermine the US and create a tailwind for the major pair.