FX.co ★ Pound Holds Near 3-Year Highs

The British pound remained around $1.35, maintaining its near three-year high, largely due to widespread dollar weakness sparked by renewed tariff threats from President Trump and indications of cooling inflation in the United States. In the UK, the GDP experienced a contraction of 0.3% in April, a figure considerably sharper than the projected decline of 0.1%. This decrease was attributed to a combination of rising energy bills, increased National Insurance contributions, and higher Stamp Duty Land Tax rates. Indicators from the labor market also suggested a slowdown in momentum. Despite these challenges, it is broadly anticipated that the Bank of England will keep interest rates steady during its meeting next week. At the same time, Chancellor Reeves announced a multi-year spending framework, promising £2 trillion in public investment. This strategy includes annual departmental budget growth of 2.3% in real terms, signaling ongoing support for essential sectors. However, analysts have pointed out the constrained fiscal environment described in the review, increasing the probability of tax hikes later this year.