Sterling Surges Amid U.S.-Europe Trade Tensions Over Greenland

The pound experiences a significant rally as investors move away from the dollar amidst U.S.-Europe trade tensions concerning Greenland. The sterling rises 0.8%, and Euro gains strength, suggesting the worst economic downturn may have passed, with analysts predicting possible interest-rate cuts by the Bank of England.

The pound surged to its largest two-day rise since December, driven by investor response to mounting trade tensions between the U.S. and Europe over Greenland. With U.S. President Donald Trump's tariff threat on imports from several European countries, investors have started offloading U.S. assets.

European currencies and gold have become more attractive, with the sterling seeing a 0.8% increase. Meanwhile, the euro has become a clear beneficiary, rising 0.4% to trade at 87.03 pence. Despite bleak UK labor market data, indicators such as reduced redundancies and stabilized unemployment hint at an economic improvement.

George Buckley from Nomura noted the rate cuts that could follow. Given the helpful economic backdrop, the Bank of England might cut rates to 3.50% in April, with markets currently anticipating a rate cut as early as midyear, factoring in a 60% chance of an additional cut by December.

(With inputs from agencies.)