Pound Rallies as Markets React to US Tariffs and European Defense Moves

The British pound has strengthened against the U.S. dollar amid the impact of Trump-imposed tariffs and economic shifts. These tariffs target goods from Canada, Mexico, and China, affecting the U.S. economy and market sentiment. European defense initiatives and military aid reevaluations further influence currency and bond market reactions.

The British pound strengthened against the U.S. dollar Tuesday as global markets digested the broader implications of President Donald Trump's tariffs on countries including Canada, Mexico, and China, amid indicators of an economic slowdown in the U.S.

Sterling appreciated to $1.2741, reaching near three-month highs after a 0.97% surge on Monday, fueled by weak U.S. economic data and improving European market conditions. Kamal Sharma, senior FX strategist at Bank of America, noted that investor sentiment favored the pound as immediate concerns shifted towards tariff discussions and geopolitical tensions in Russia and Ukraine.

Trump's tariffs, with a 25% rate on goods from Mexico and Canada and increased duties on Chinese imports, are expected to weigh on U.S. markets. In contrast, Britain's balanced trade relationship with the U.S. could mitigate these effects, contributing to the pound's recent strength. European defense developments and changes in military aid dynamics further adjust market perspectives.

(With inputs from agencies.)