The British pound has strengthened against the US dollar today, buoyed by the latter’s decline as investors assess the implications of new US tariffs. Over the past three months, sterling has appreciated approximately 5% from its lowest point this year. At 20:30 GMT, the GBP/USD exchange rate stood at 1.2794, marking its highest level since December 12, 2024.
The recent surge in the pound is largely attributed to US dollar weakness rather than inherent sterling strength. The dollar has experienced its most significant two-day decline since 2023, following President Donald Trump’s implementation of 25% tariffs on imports from Mexico and Canada, and an increase in duties on Chinese goods to 20%.
These measures have raised concerns about the dollar’s traditional safe-haven status, prompting investors to seek alternatives.
In retaliation, Canada has imposed 25% tariffs on C$30 billion worth of US imports, while China has announced counter-tariffs on American products.
Analysts had anticipated that the dollar would strengthen in response to the tariffs, given its historical role as a safe-haven currency during periods of economic uncertainty. However, the current market reaction suggests that this status may be under threat. Deutsche Bank’s global head of FX research, George Saravelos, noted that the growing US current account deficit and declining correlation between the dollar and risk assets indicate a potential overvaluation of the currency.
