Sterling Sways as Trade Tensions Loom

The British pound declined against the dollar, poised for a higher week-end despite unchanged interest rates from the Bank of England. Global trade tensions and U.S. tariffs continue to influence the pound, with concerns about potential impacts on growth and inflation. Upcoming UK economic data remains pivotal.

The British pound fell against the dollar on Friday, though it was still set to close the week on a stronger note. This follows the Bank of England's (BoE) decision to maintain interest rates while voicing concerns over escalating global trade tensions.

Sterling dropped by 0.2%, settling at $1.29405, after reaching $1.301 earlier. It remains on track for its third consecutive weekly gain. In relation to the euro, it was largely stable at 83.695 pence.

BoE Governor Andrew Bailey, reflecting a global central banking sentiment, expressed caution about economic outlooks amid U.S. President Donald Trump's tariffs. Kenneth Broux from Societe Generale highlighted the uncertainty surrounding the trade war's impact on growth and inflation, predicting its potential spillover effects on the UK economy.

With UK inflation forecasted to peak at 3.75% and potential tax hikes on the horizon, UK inflation and wage growth data are closely monitored. Meanwhile, mounting borrowing underscores challenges for Finance Minister Rachel Reeves as she prepares to address spending plan adjustments.

(With inputs from agencies.)