The British pound is trading around $1.332, close to a 7-month high of $1.338, as easing US-China trade tensions boosted investor sentiment and reduced demand for safe-haven assets.
Sterling holds close to seven-month high
The positive movement in the pound came after US President Trump mentioned ongoing tariff talks with China, signaling a potential de-escalation of the trade war that had been a major source of uncertainty in global markets. The reduced concerns over the trade conflict have helped to stabilize global markets and ease fears of an impending recession, particularly in the US. However, while the news was encouraging for risk assets, economists remain cautious, warning that the trade war has already had detrimental effects on the US economy, with signs of weakening trade flows and declining business activity.
Economists warn on UK economy
Despite the optimism, economists are pointing to the long-term economic damage that could result from the ongoing trade dispute, particularly in terms of global supply chains and international business confidence. In the UK, the EY Item Club has downgraded its economic growth projections, citing the continued effects of Trump’s tariffs. The group now expects UK GDP growth to slow to 0.8% in 2025, down from its previous forecast of 1%. The 2026 growth forecast has also been revised downward to 0.9%, highlighting the continued impact of the global tariff war on the UK's economic trajectory. The slowdown is expected to affect consumer spending, which has already been under pressure, as well as business investment, which remains subdued amid ongoing trade uncertainties and Brexit-related concerns.
In the UK this week, the economic data calendar is relatively light, with only the Nationwide House Price Index and the Bank of England’s money and credit indicators scheduled for release. These figures could provide some insight into the housing market and broader financial conditions, but with little major data expected, market participants may focus more on global developments, especially regarding the future of US-China trade talks and any potential monetary policy shifts by central banks.
