FX.co ★ Sterling Strengthens to 6-Month High

The pound recently surpassed $1.32, marking a six-month high, as markets reacted to diminishing trade fears and evolving expectations from the Bank of England (BoE). Speculation that President Trump might postpone the implementation of auto tariffs provided support to UK exporters, particularly those in the car parts sector reliant on US trade, positively impacting the value of sterling. In contrast, there is a growing belief that the BoE will soon lower interest rates, with markets nearly fully anticipating a rate reduction by May due to UK companies reducing their workforce in response to upcoming tax increases and higher wage expenses. Although private-sector wage growth remains robust at 5.9%, there was a significant decline in employment in March, suggesting underlying economic vulnerabilities. A stronger pound, coupled with softer global demand due to trade disruptions, may alleviate short-term inflationary pressures. However, anticipated increases in energy and regulated prices later this year add complexity to the BoE's strategy. Investors are increasingly confident in quicker rate cuts, even amidst ongoing inflationary risks.