The British pound edged down slightly to $1.338 but remained close to its highest level since February 2022, bolstered by broad-based weakness in the US dollar. Despite the minor retreat, sterling held onto a solid 3.8% gain in April, putting it on course for its strongest monthly performance since November 2023.
Sterling heads for best month since 2023
The currency’s resilience has been underpinned by a combination of favorable trade positioning, monetary policy expectations, and relative geopolitical insulation compared to other major economies.
The UK is perceived as being less exposed to the impact of new US trade measures, with President Trump delaying the imposition of fresh tariffs on allies until at least July. This has helped soothe investor nerves, particularly as the UK’s trading relationship with the US differs markedly from other major partners. In 2024, the US recorded a $12 billion goods surplus with the UK—a stark contrast to its persistent trade deficits with China and the European Union—making the UK less likely to be a target of aggressive trade retaliation. This dynamic has added to sterling’s relative appeal in the current risk-sensitive environment.
BoE expectations support the pound
Additionally, the pound has found support from expectations that the Bank of England will adopt a more cautious approach to monetary easing compared to other central banks. While markets are pricing in around 85 basis points of rate cuts from the BoE this year—roughly in line with expectations for the Federal Reserve—there is a growing sense that the BoE may lag behind the European Central Bank or others, especially given persistent domestic inflation pressures and a still-tight labor market.
Eyes on US data
Investor attention is now turning to upcoming US macroeconomic data, particularly key labor market and inflation reports, which could provide fresh direction for the dollar and influence relative interest rate expectations. Meanwhile, recent reports suggesting the US may consider selective tariff relief have helped ease some immediate concerns, though broader tensions—especially with China—continue to pose a risk to global trade flows and investor sentiment.
