Sterling edges higher as UK avoids Trump tariff hike

Sterling firmed against the dollar on Wednesday as the UK avoided inclusion in US President Donald Trump’s latest tariff hike, easing investor concerns and lifting sentiment alongside modestly positive domestic data.

Trump doubled tariffs on steel and aluminium imports to 50 per cent but exempted the UK. While the UK signed a trade agreement with the US last month, analysts warned that the sudden shift could undermine confidence in the deal’s durability.

“UK steel exports were supposed to incur no tariff, so Trump’s abrupt change may cause UK negotiators to question the value of ‘agreements’ made,” said Paul Donovan, chief economist at UBS Global Wealth Management.

The pound rose 0.12 per cent to $1.353 and held steady against the euro at 84.11 pence by 0947 GMT. Sterling has outperformed the dollar and other major currencies recently, as Trump’s unpredictable trade moves drive investors to seek stability outside the US.

Meanwhile, Tuesday’s UK gilt auctions showed strong demand for longer-term debt, contrasting with weaker US and Japanese bond sales.

However, investors remain cautious as Finance Minister Rachel Reeves prepares to outline funding plans for infrastructure projects. Yields on 30- and 40-year gilts climbed around two basis points.

In economic news, Britain’s services sector returned to modest growth last month, though the Bank of England expects global uncertainty to weigh on sentiment. Markets are pricing in around 37 basis points of rate cuts by year-end, LSEG data showed.

Attribution: Reuters
Subediting: M. S. Salama