Pound retreats from 6-month high amid trade uncertainty

The British pound has fallen from its 6-month peak against the US dollar, a level reached last week when the pound strengthened due to dollar weakness triggered by escalating trade tensions. On April 2, Donald Trump announced new import restrictions on US trading partners. On Friday, China retaliated by imposing 34% duties on a number of American goods. Trading Economics suggests the US president may be underestimating risks of rising inflation and potential recession.

Meanwhile, UK Prime Minister Keir Starmer confirmed Britain is implementing measures to shield its economy from the consequences of trade conflicts unleashed by Trump.

Investors, in turn, expect the Bank of England to cut interest rates because of the threat of a global economic recession. They now forecast a reduction in borrowing costs by about 85 basis points this year against 52 points announced earlier.