Sterling Stays Near Four-Month Highs Amid Trade Tensions
The British pound experienced a slight dip against a stronger dollar on Thursday but held near its four-month peak. This resilience is largely attributed to the UK's cautious approach to ongoing U.S. trade disputes.
Current Market Status
- GBP/USD: Last traded down 0.15% at $1.2941.
- Recent High: Reached $1.299 on Wednesday, marking the highest level since November 7.
Francesco Pesole, FX strategist at ING, noted that the dollar's strength is currently the primary market driver. The GBP/USD pair is easing from nearly touching 1.30, moving back towards 1.29.
Factors Supporting the Pound
Analysts emphasize the UK's relatively balanced trade relationship with the U.S. as a key factor supporting the pound.
- Tariffs: While the EU and Canada have retaliated against U.S. tariffs on steel and aluminum imports, the UK has not followed suit.
Expert Analysis
Michael Pfister, FX analyst at Commerzbank, highlights the UK's trade dynamics:
"The important thing for GBP is that the UK has a trade deficit with the US and exports a lot more services than other countries, so is not as vulnerable to US tariffs as the European Union."
Pound's Performance Since January
Sterling has appreciated by over 6% against the dollar since President Trump assumed office in January.
Potential Future Tariffs
On Thursday, Trump threatened to impose a 200% tariff on European wines and alcoholic products if the EU proceeds with its planned tax on American whiskey.
GBP/EUR Performance
- GBP/EUR: The pound was up 0.2% against the euro, trading at 83.81 pence.
Key Takeaways
The British pound remains relatively strong due to a combination of factors, including a balanced trade position with the U.S. and a cautious approach to trade retaliations. However, the market remains sensitive to broader dollar movements and potential new tariff impositions.
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