On Monday, December 2, the British pound surrendered most of the gains it had made against the U.S. dollar late last week. Opening below 1.273, GBP traded under 1.270 during the morning session, hitting its lowest level since November 12.

By the afternoon, the pound managed to recover slightly, trading around 1.271 at the time of writing. However, the weak start to the week, coupled with ongoing geopolitical factors, suggests the possibility of a reversal and further strengthening of the dollar against the pound.

The U.S. has announced increased tariffs on major trading partners, including Mexico, Canada, and China. Additionally, a proposal by President Trump to impose 100% duties on goods from BRICS nations—Brazil, Russia, India, China, and South Africa—if they replace the U.S. dollar with another currency for international transactions—has raised concerns. Such measures could drive up prices and inflation within the U.S. itself.

In response, the Federal Reserve may be forced to adjust its policies, abandoning plans for rate cuts and potentially even resuming hikes.