Britain’s pound held steady against the dollar on Thursday, remaining close to a three-year high reached earlier in the week as investors moved away from the U.S. currency following President Donald Trump’s tariff policies.
A Thursday survey confirmed British manufacturing activity contracted for the seventh consecutive month in April, highlighting the impact of Trump’s tariffs and Britain’s employer tax increases on business activity.
The pound traded at $1.3327, down less than 0.1% for the day. It reached its highest level since February 2022 on Monday, having gained 3.2% last month – its largest monthly increase against the dollar since November 2023.
The U.S. currency has suffered significantly from Trump’s trade policies, with inconsistent tariff decisions undermining confidence and reducing growth forecasts.
“We expect the pound to remain firm against the U.S. dollar over the course of the year, though some short-term setbacks may occur following the recent rally,” UBS FX strategists noted.
Market attention Thursday focused on local elections across parts of Britain, which typically don’t move markets but provide insights into future voting patterns. The right-wing populist Reform UK Party is expected to perform strongly, challenging both the ruling Labour Party and opposition Conservatives.
ING head of FX strategy Chris Turner also highlighted this month’s UK-EU summit as an event to watch, with expectations Britain could sign a new security and defense pact with the bloc.
“Closer European relations normally help sterling,” Turner said.
The pound was at 84.99 pence per euro, little changed on the day. It fell 1.5% against the euro last month, its biggest monthly drop against the single currency since December 2022.
The euro has benefited from the recent dollar weakness, gaining against most major currencies through April.
“We think the global investment environment will be the driver for the euro-pound in the coming months,” said Mohamad Al-Saraf, FX research associate at Danske Bank.
“If we see elevated uncertainty, widening credit spreads, and positive correlation to the negative environment, as we believe, we favor a weaker pound,” Al-Saraf added, expecting the euro to reach 88 pence on both six- and 12-month horizons.
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