LONDON (Reuters) -The pound edged up on Monday to trade around its highest since early 2022, as the dollar came under broad pressure following another abrupt reversal in trade policy by U.S. President
Pound Reaches Highest Level Since Early 2022 as Dollar Weakens
LONDON (Reuters) -The pound edged up on Monday to trade around its highest since early 2022, as the dollar came under broad pressure following another abrupt reversal in trade policy by U.S. President Donald Trump that gave investors a fresh dose of uncertainty.
On Friday, Trump sent a shiver through global markets by threatening a 50% tariff on all European Union imports into the U.S. from June 1, reigniting concern about the impact of U.S. trade policies on the underlying economy.
By Sunday, he had reversed tack, pushing the deadline for tariffs to July 9 from June 1, after European Commission President Ursula von der Leyen told him on the telephone that the 27-nation bloc needed more time to produce a deal.
The EU said on Monday the call at the weekend had given "new impetus" to trade talks.
Even though Britain has a deal in place with the U.S., the pound has been caught up in the relief rally in non-U.S. assets.
Sterling was up 0.13% at $1.3558, having touched a session high of $1.359, its highest since February 2022. Trading volumes were likely to be lighter than usual given public holidays on Monday in both Britain and the United States.
The pound has gained more than 8% so far this year against the dollar, its strongest performance in the first five months of the year since 2009, when the world was emerging from the global financial crisis.
Much of that has been down to the fact that persistent inflation and relatively steady growth in Britain mean traders believe the Bank of England will not be able to cut interest rates as quickly as other central banks.
At Friday's close, traders were pricing in the prospect of just 41 basis points' worth of rate cuts by year-end, equivalent to one quarter-point cut and a roughly 50% chance of a second.
By contrast, they are almost fully pricing in the chance of two more rate cuts from both the U.S. and euro zone central banks.
"The pound is enjoying strong momentum but the move is starting to look a bit stretched," analysts at BBVA said in a note on Monday.
Against the euro, the pound held steady at 83.95 pence.
(Reporting by Amanda Cooper;Editing by Helen Popper)
