Sterling Stumbles Amid Global Tariff Turmoil

The value of the British pound fell against major currencies amid renewed global trade tensions stemming from U.S.-China tariff disputes. Market volatility increased as risk assets sold off, prompting speculation about future Bank of England rate cuts and a potential UK-US trade deal under Prime Minister Keir Starmer.

Sterling took a hit on Friday, falling against the dollar and the yen, and reaching a seven-month low compared to the euro, as China's new tariffs on U.S. goods fueled a selloff in risky assets.

This slump in global stocks marked the second consecutive day of losses following U.S. President Donald Trump's comprehensive tariff proposals. The announcement of additional 34% Chinese tariffs on all U.S. goods exacerbated the decline, with the British pound, known for its sensitivity to risk sentiment, losing its luster against traditional safe haven currencies like the yen, franc, and dollar. Trump's actions also cast doubt on the dollar's status as a safe-haven currency.

Despite depreciation to $1.3014 against the dollar and a notable decline to 187.92 yen, market participants are hopeful for a UK-US trade agreement that British Prime Minister Keir Starmer contends is progressing well. Meanwhile, bets are increasing on future Bank of England rate cuts, with full pricing for three 25 basis-point reductions by year's end, consistent with European Central Bank expectations.

(With inputs from agencies.)