Sterling on Track for Biggest Quarterly Gain in Over Two Years Amid U.S. Economic Uncertainty
Sterling Heads for Biggest Quarterly Jump in Over Two Years
By Johann M Cherian
The British pound is on course to record its most robust quarterly performance since late 2022, lifted by a combination of favorable trade developments, improved domestic growth, and waning investor confidence in U.S. economic stability.
The GBP/USD pair has surged nearly 6% this quarter, bringing the pound’s total gain to over 9% in the past six months, as fears of a U.S. recession—fueled by erratic policymaking under President Donald Trump—continue to unsettle global markets.
"Sell America" Sentiment Bolsters Pound
As the "sell America" narrative gains traction among global investors, Sterling has emerged as one of the top beneficiaries. Concerns about the U.S. economy slipping into recession due to unpredictable trade and fiscal policies have made the pound a more attractive alternative for currency traders.
On Monday, the pound experienced mild fluctuations, last trading at $1.3705, down just 0.1%, following a strong two-week rally. Against the euro, it slipped slightly, with the EUR/GBP exchange rate last seen at 85.59 pence.
UK-U.S. Trade Agreement Boosts Sentiment
Adding to investor optimism, the UK became the first major economy to finalize a trade deal with the U.S., helping stabilize expectations surrounding post-Brexit economic ties. The agreement includes provisions to lower U.S. tariffs on select British industrial goods, effective from Monday.
“The UK was first out of the block in terms of getting a deal signed with the United States," said Susannah Streeter, senior analyst at Hargreaves Lansdown. "It has brought more stability in terms of the UK’s relationship with the U.S. compared to the European Union."
Despite some remaining uncertainties across specific sectors, the deal is widely seen as a diplomatic and economic win for Britain.
Economic Growth Surges, but Headwinds Remain
In parallel, official data confirmed that the British economy expanded at its fastest pace in a year during Q1 2025, adding further momentum to Sterling’s upward movement. However, rising signs of softening consumer demand have economists wary about sustained growth in the coming months.
Bank of England Poised for Rate Cuts
Markets are increasingly pricing in potential interest rate cuts by the Bank of England (BoE) later this year. According to LSEG data, traders expect 50 basis points of cuts by December, with the first likely to occur in September.
Rate cuts, typically bearish for a currency, are currently being offset by the positive effects of foreign inflows and reduced Brexit-related volatility.
FTSE 250 Joins the Rally
Sterling isn’t the only British asset benefiting from the global shift in sentiment. The FTSE 250 mid-cap index, heavily exposed to the domestic economy, is poised to end the quarter with its best performance since October 2020.
Conclusion:
Despite looming risks—such as weakening consumer demand and potential monetary easing—the pound's recent gains reflect growing investor preference for relative stability and clarity in UK markets compared to the geopolitical and economic noise from the United States.
With a finalized trade deal, robust quarterly growth, and improving investor sentiment, Sterling may continue to defy traditional expectations, at least in the short term.
Disclaimer:
This article is AI-generated for informational purposes based on publicly available news sources. It does not constitute financial advice. Please consult a certified financial professional before making investment decisions.
