The British pound held steady around $1.371, near its highest since October 2021, as a new UK-US trade deal took effect. The agreement reduces tariffs on British car exports from 27.5% to 10% and eliminates duties on aerospace goods like engines and aircraft parts. However, a baseline 10% car tariff remains, and a deal on zero tariffs for core steel products is still pending. Meanwhile, the UK’s Q1 GDP growth was confirmed at 0.7%, matching earlier estimates.
The pound continues to benefit from the Bank of England’s reluctance to cut interest rates compared to peers like the ECB, as UK inflation remains sticky. Core inflation has shown little movement over the past year, causing concern among BoE officials and complicating rate cut decisions. Also, the US dollar weakened as focus shifts to President Trump’s proposed tax and spending bill, now under Senate review, which could add $3.3 trillion to the national debt, adding uncertainty around US fiscal policy and Fed independence.
