The British pound weakened toward $1.30 on Monday, its lowest level since April 11, as the US dollar strengthened broadly following the announcement of a significant de-escalation in US-China trade tensions.
British pound hits one-month low
The breakthrough, which exceeded market expectations, saw the US agree to slash tariffs on Chinese goods from 145% to 30% for a 90-day period, while China reciprocated by lowering its levies on US imports from 125% to 10%. The move sparked a surge in global risk appetite, lifting the greenback against most major peers, including the pound.
Adding to the broader trade optimism, US President Donald Trump and UK Prime Minister Keir Starmer finalized a long-awaited bilateral trade agreement late last week. The deal will eliminate long-standing UK non-tariff barriers, expedite US goods through customs, and include key provisions to safeguard Britain’s car and steel industries. The agreement was widely welcomed by markets as it strengthens post-Brexit trade ties between the two allies. Meanwhile, the UK also secured a trade pact with India, aimed at reducing tariffs and enhancing market access for British services, and is preparing to enter negotiations with the EU to expand the existing Trade and Cooperation Agreement.
Divided BoE cut rates last week
On the monetary policy front, the Bank of England delivered a closely contested decision, voting 5-4 to lower the Bank Rate by 25 basis points to 4.25%, marking the lowest level in two years. While the majority of policymakers highlighted encouraging disinflation progress, they stressed that upside risks to inflation remain, particularly in services and wage growth, warranting a cautious and data-dependent approach to future policy moves. The split vote and ongoing global uncertainties have prompted markets to scale back aggressive rate cut bets, adding to the downward pressure on the pound.
Looking ahead, traders will focus on upcoming UK labor market and inflation data due later this week, which could offer further insights into the Bank of England’s policy trajectory, as well as developments in global trade talks that may continue to sway currency markets.
