Tariff Turbulence: Sterling's Shifting Fortunes

Sterling weakened against the dollar but strengthened against the euro as the dollar rallied following U.S. tariffs on Canada, Mexico, and China. Markets anticipate UK interest rate cuts, considering potential global economic impacts of the broad trade war amid U.S.'s 'exceptionalism' outlook.

On Monday, the Sterling weakened against the dollar but gained ground against the euro as the U.S. dollar surged following newly imposed tariffs by the Trump administration on Canada, Mexico, and China. Hopes grew that Britain might avoid similar levies, further stirring currency markets.

The pound decreased by 0.66% against the dollar, landing at $1.23135, while showing almost a 0.5% increase against the euro, reaching 83.225 pence. Over the weekend, President Donald Trump enacted duties of 25% on Canada and Mexico and 10% on China, citing the necessity to combat drug trafficking and illegal immigration.

Currency analysts reported market activities based on expectations that tariffs would hike inflation and maintain elevated U.S. interest rates, buttressing the dollar. Investors brace for further volatility, noting the possible impacts on global economic growth as Canada and Mexico pledge retaliatory actions. Meanwhile, expectations for an interest rate cut by the Bank of England are high, with analysts predicting minimal market reaction.

(With inputs from agencies.)