Sterling Surges Amid Fed Concerns and UK's Inflation Woes

Sterling reached a 7-month high against the dollar due to weakening greenback amid Fed concerns and U.S. policy issues. Despite inflation and labor challenges in the UK, analysts foresee potential headwinds for the pound. Markets anticipate Bank of England rate reductions amid ongoing trade discussions between Prime Minister Starmer and Trump.

The British pound surged to a seven-month high against the dollar on Tuesday amidst growing concerns about the Federal Reserve's independence. This follows U.S. President Donald Trump's criticisms of the Fed chair, creating volatility within currency markets as the greenback weakened.

Economic adviser Kevin Hassett stated that the Trump administration would consider its options on Fed Chair Jerome Powell's future, leading to further uncertainty. While sterling gained against the dollar, it slightly dropped against the euro, benefiting from U.S. assets selloff following recent policy shifts.

In the UK, inflation and labor market challenges loom large, with the Bank of England expected to cut rates by 25 basis points next month. Meanwhile, trade discussions between Prime Minister Keir Starmer and Trump continue, addressing tariffs, and the geopolitical situations in Ukraine and Iran.

(With inputs from agencies.)