Sterling Surge Amid Tariff Speculations

The pound reached a one-week high against the dollar following reports of potential tariff measures by the Trump administration. Despite Trump's denial of the report, expectations grow about the U.S. economic strategy amid inflation concerns. Analysts debate how these dynamics affect the Bank of England's monetary policy.

The pound sterling climbed to a one-week high against the dollar on Tuesday after media reports suggested that U.S. President-elect Donald Trump's advisers were considering implementing tariffs only on critical imports.

Trump, denying the report, had previously promised to impose a 10% tariff on global imports to the U.S. and a hefty 60% tariff on Chinese goods, fueling expectations of heightened inflation and strengthening the dollar. As a result, sterling appreciated by 0.25% to $1.2548 from Monday's high of $1.2562, marking its peak since December 31.

However, the pound's value had recently dropped to $1.2349, its lowest since April 2024, amid the dollar's rallies driven by robust U.S. growth forecasts and potential tariff hikes. Concerns also rose due to revised British GDP data and the Bank of England's rate decision debate. Traders are now forecasting a reduction of 56 basis points in interest rates by the BoE this year, a slight decline from prior projections.

(With inputs from agencies.)