Read the latest GBP/USD Forecast as the pair plunges below 1.3600. Discover how President Trump’s new copper tariffs and the OBR’s warning on UK debt are driving a massive risk-off wave.
GBP/USD Forecast: Sterling Plunges Below 1.3600 Amid Trump Tariffs and UK Debt Crisis
Why is GBP/USD falling? The GBP/USD forecast has turned bearish as the pair dropped below the 1.3600 psychological support level. The decline is driven by a “double whammy”: increased safe-haven demand for the US Dollar following President Trump’s announcement of aggressive tariffs on copper and pharmaceuticals, combined with a stark warning from the UK’s Office for Budget Responsibility regarding unsustainable long-term British public debt.
The currency markets are witnessing a significant shift in sentiment as of Wednesday, July 9, 2025. The GBP/USD pair has extended its losing streak, trading around 1.3580 during Asian market hours.
Traders are fleeing riskier assets such as the British Pound (GBP) in favor of the US Dollar (USD), which is gaining ground amidst a surge in global risk aversion. The catalysts for this movement are twofold: aggressive protectionist trade policies emerging from the White House and alarming fiscal data coming out of London.
In this analysis, we break down the new US tariffs on metals and medicines, the OBR’s dire warning for the UK economy, and what this means for the future of the GBP/USD forecast.
The “Trump Trade” Returns: Tariffs ignite Risk-Off Mood
The US Dollar is surging as President Donald Trump doubles down on his “America First” trade strategy. On Tuesday, during a cabinet meeting at the White House, the President signaled a massive escalation in trade protectionism that has sent shockwaves through global markets.
New Tariffs on Copper and Pharmaceuticals
President Trump told reporters that he is preparing to introduce:
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A 50% tariff on imported copper.
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A staggering 200% tariff on pharmaceutical imports.
While the President did not specify an exact implementation date, the mere announcement was enough to spike volatility. These measures are designed to strengthen domestic production and reduce reliance on foreign supply chains. Currently, the United States imports nearly half of its copper, primarily from Chile.
Impact on Global Trade
These new levies are not isolated incidents. They adjust the “Red Metal” (copper) to align with existing 50% duties on steel and aluminum. This intensification of trade tensions adds significant volatility to the metals market and strengthens the US Dollar’s position as the ultimate safe-haven currency.
US Treasury Secretary Scott Bessent bolstered the administration’s stance, noting the financial “success” of these policies.
“The United States has already received about $100 billion in customs revenue this year and could see the total increase to $300 billion by the end of 2025, driven by President Trump’s escalating trade measures.”
For Forex traders, this influx of revenue and the protective stance around US industry creates a bullish environment for the Greenback, weighing heavily on the GBP/USD pair.
UK Fiscal Woes: OBR Warns of Unsustainable Debt
While the Dollar strengthens on trade war rhetoric, the British Pound is weakening due to internal structural concerns. The fiscal outlook for the United Kingdom (UK) has darkened significantly following a new report from the Office for Budget Responsibility (OBR).
The UK’s independent fiscal watchdog has issued a stark warning: public finances are on an “unsustainable long-term track.”
The Debt Trajectory
Richard Hughes, the chair of the OBR, highlighted terrifying projections for the British economy if current trends continue. Public debt could surpass 270% of GDP by the early 2070s.
The drivers of this fiscal burden include:
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An Aging Population: The “triple lock” pension guarantee and rising social care costs are ballooning.
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Healthcare Costs: The NHS requires increasing funding to manage a demographic shift.
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Climate Implementation: The transition to Net Zero is proving more costly than anticipated.
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Defense Spending: Increasing global geopolitical tensions are forcing the UK to commit more funds to the military.
This combination of slow growth and skyrocketing projected debt makes the Pound less attractive to long-term investors, further depressing the GBP/USD forecast.
Commodity Chaos: The Copper Connection
The specific targeting of copper by the Trump administration is noteworthy for the currency markets. Copper is often seen as a bellwether for the global economy— “Dr. Copper,” as it is known.
By placing a 50% tariff on this essential industrial metal, the US is effectively raising costs for global manufacturers while attempting to insulate domestic miners.
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Supply Chain Shock: Since the US relies heavily on Chilean copper, this tariff disrupts established trade routes.
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Inflationary Pressure: Higher material costs could reignite inflation fears, potentially forcing the Federal Reserve to keep interest rates higher for longer—another bullish factor for the USD.
Technical Analysis: Breaking the 1.3600 Floor
From a technical perspective, the break below 1.3600 is a significant bearish signal for GBP/USD.
The pair is currently consolidating near 1.3580. If the risk-off mood continues, bears will likely target the next psychological support levels at 1.3550 and 1.3500. The divergence between the US economic aggression and the UK’s fiscal fragility suggests that the path of least resistance remains to the downside.
Unless there is a reversal in trade rhetoric or a surprise hawkish pivot from the Bank of England, the Pound faces a difficult road ahead in Q3 2025.
Understanding the Pound Sterling (GBP)
For those new to trading this major pair, it is essential to understand the fundamental drivers of the British currency.
The Role of the Bank of England (BoE)
The single most important factor affecting the value of the Pound is monetary policy. The Bank of England sets interest rates to achieve its primary goal of price stability (inflation target of 2%).
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High Inflation: The BoE raises rates. This is generally positive for GBP as it attracts foreign investment.
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Low Growth: The BoE lowers rates. This cheapens credit but can be negative for GBP yield seekers.
Economic Indicators
Data releases measure the health of the economy and directly impact the GBP/USD forecast:
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GDP: Gross Domestic Product measures overall economic output.
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PMIs: Purchasing Managers’ Indexes show expansion or contraction in manufacturing and services.
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Trade Balance: A positive trade balance (exporting more than importing) strengthens the currency.
Currently, with the OBR warning of debt issues, the fundamental backdrop for the UK economy is weakening, making the BoE’s job significantly harder.
Frequently Asked Questions (FAQ)
1. Why did the GBP/USD exchange rate drop below 1.3600? The drop is primarily due to a strengthening US Dollar caused by risk-aversion following President Trump’s announcement of new tariffs. Simultaneously, the British Pound weakened after the OBR warned that UK public debt is on an unsustainable path.
2. What are the new tariffs announced by President Trump? President Trump announced plans for a 50% tariff on imported copper and a 200% tariff on imported pharmaceuticals. These measures are intended to boost US domestic production but have increased global market volatility.
3. What did the OBR report say about the UK economy? The Office for Budget Responsibility (OBR) warned that UK public finances are unsustainable in the long term. They project that public debt could reach 270% of GDP by the 2070s due to an aging population, healthcare costs, and climate change initiatives.
4. How does US Treasury revenue affect the dollar? Treasury Secretary Scott Bessent stated that customs revenue could hit $300 billion by the end of 2025. Higher government revenue and protectionist policies often strengthen the domestic currency (USD) by reducing reliance on foreign capital and improving the fiscal balance.
5. What is the outlook for GBP/USD in late 2025? The outlook remains bearish (negative) in the short term. With the US adopting aggressive trade policies and the UK facing long-term fiscal challenges, the Pound is likely to remain under pressure against the Dollar unless UK economic data improves significantly.