At the beginning of Friday's Asian session, the pound rose to around 1.3030 against the US dollar, marking its fourth consecutive trading day of gains, driven by the overall weakness of the US dollar. The US Dollar Index (DXY) has fallen to around 100.20, hitting a new low since July 2023, as weak US economic data intensifies market concerns about the economic outlook.

The US Consumer Price Index (CPI) rose 2.4% year-on-year in March, lower than the previous value of 2.8% and the expected value of 2.6%, indicating that the momentum of inflation warming is slowing down. The core CPI annual rate has also decreased from 3.1% to 2.8%, which is also lower than the market expectation of 3.0%. At the monthly level, CPI fell by 0.1%, indicating negative growth.

The CPI data is a clear dovish signal, and the expectation of future interest rate cuts by the Federal Reserve will further strengthen

Market sentiment has also been affected by Trump's latest tariff decision. Trump announced a 90 day suspension of new tariff plans on most trading partners, but at the same time raised tariffs on Asian countries to 145%, demonstrating the duality of his policy.

The suspension of tax increases has indeed reduced systemic risks in the market, but the significant taxation on Asian countries still puts pressure on the global supply chain

The pound against the US dollar benefited from the combined push of a rebound in risk appetite and a weak US dollar. Despite the challenges facing the UK economy, the market's expectations for the Bank of England's future monetary policy are relatively clear, which actually brings some stability.

According to market pricing, investors expect the Bank of England to implement a quarterly pace of interest rate cuts starting from May, with three expected cuts of 25 basis points each throughout the year. Compared to the possibility of a more aggressive interest rate cut cycle by the Federal Reserve, the pound is supported.

On a technical level, GBP/USD has broken through the 1.3000 level and opened up further upward space, with short-term resistance looking towards 1.3100. If the US dollar continues to be under pressure, the pound may continue to rise.

The key data that needs attention include the US Producer Price Index (PPI) and Michigan Consumer Confidence Index released that evening, which will further affect the market's judgment of the Federal Reserve's interest rate path.

Editor's viewpoint:

The current trend of the US dollar has clearly deviated from the logic of interest rate differentials and is now dominated by economic confidence and policy expectations. The pound has become a beneficiary in the global sentiment improvement due to its risk currency attribute. If the Federal Reserve clarifies the trajectory of interest rate cuts in the coming months, while the Bank of England maintains a "slow but predictable" policy pace, the pound may be expected to further rise against the dollar.