The British pound maintained stability during Wednesday trading because investors studied Bank of England financial stability reports while preparing for rising international trade conflicts.
The exchange rate of sterling remained steady at $1.35 while its value against the euro increased by 0.17% to reach 86.14 pence. Market participants ignored BoE warnings about fiscal risks triggering market disruptions because they focused on how the UK would handle Trump’s tariff campaign.
The U.S. president declared his intention to impose a 50% tariff on copper imports while indicating future levies on semiconductors and pharmaceuticals which intensified the pre-August 1 trade tensions. The UK maintains an early trade agreement with Washington which could protect it from additional duties.
Sterling has maintained its strength against the dollar at nearly 9% this year yet its value remains under pressure because of the recent UK welfare bill that raised public finance concerns. Investors now fear that the government might increase taxes or boost borrowing in the upcoming autumn budget.
MUFG analyst Derek Halpenny stated that the UK faces a credibility crisis. The market will experience violent reactions if the government fails to take decisive fiscal actions.
The recent sharp decline in gilts has restricted the upward movement of sterling. Market analysts predict that trade uncertainty together with domestic political factors will produce volatile trading conditions throughout the upcoming period.
