The pound sterling (GBP) has rebounded sharply against the U.S. dollar (USD), climbing to 1.3470 during European trading hours on Thursday, following a U.S. court ruling that struck down President Donald Trump’s sweeping tariff policies.
The United States Court of International Trade declared the tariffs, announced on “Liberation Day,” unconstitutional, citing misuse of the Carter-era International Emergency Economic Powers Act (IEEPA).
The decision, which leaves sector-specific tariffs on automobiles, metals, and semiconductors intact, has sparked a reassessment among investors and businesses that had begun adapting to the tariffs.
The U.S. Dollar Index (DXY) rose modestly by 0.25% to 100.10, down from an earlier peak of 100.50, reflecting tempered market reactions to the ruling.
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Court Ruling Shakes Global Trade Outlook
The U.S. court’s decision to block Trump’s broad import duties has introduced fresh uncertainty into global markets, prompting a rally in the pound sterling and a surge in U.S. equities.
The court criticized the tariffs as an overreach of presidential authority and issued a 10-day deadline for the administration to seek a permanent injunction, with the White House quickly filing an appeal.
The ruling has alleviated some pressure on UK exporters, who faced a 10% tariff on goods and 25% on cars, steel, and aluminum. Recent data indicates that UK goods exports to the U.S., valued at £6.4 billion annually, were at risk of significant disruption.
The decision comes as Chancellor Rachel Reeves pushes for a U.S.-UK trade deal to mitigate remaining tariff impacts, with negotiations ongoing in Washington.
Did You Know?
The UK’s goods exports to the U.S. account for approximately 16% of its total goods exports, making the U.S. a critical trading partner, according to recent trade data.
UK Economic Optimism Fuels Pound’s Rise
The International Monetary Fund (IMF) has upgraded its UK GDP growth forecast for 2025 to 1.2% from 1.1%, driven by a robust 0.7% expansion in the first quarter, surpassing estimates of 0.6%.
The Office for National Statistics (ONS) released a stronger-than-expected report on UK retail sales growth for April, which further supported the pound.
Market expectations for a Bank of England (BoE) interest rate cut in June have diminished due to elevated Consumer Price Index (CPI) data, supporting the currency’s strength.
Investors are now focused on the upcoming U.S. Personal Consumption Expenditure (PCE) Price Index data for April, expected to show core inflation easing to 2.5% from 2.6%, which could influence Federal Reserve policy and global currency dynamics.
Recent market sentiment suggests the pound’s bullish trend remains intact, with technical indicators showing support near 1.3434.
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