Sterling’s Resilience: UK Trade Dynamics Fuel Currency Strength

Sterling ticked higher against the dollar on Thursday, a standout performer among major currencies against a rebounding greenback, which had dipped following weak U.S. data on Wednesday.

The pound gained 0.14% to $1.3574, and edged up 0.1% against the euro to 84.16 pence. It remains close to its highest level in over three years, thanks to ongoing dollar weakness, having risen more than 8% this year.

The UK's unique trade deal with the U.S. and exemption from increased U.S. steel and aluminum tariffs are also supportive factors, although the extent of their benefits is debated. Analysts like Chris Beauchamp from IG Group highlight the psychological edge the agreement gives, reducing euro-related worries for investors.

Market expectations of a 25 basis points rate cut by the Bank of England at its June meeting have been lowered, following mixed economic signals and unexpected inflation figures. Bank of England Governor Andrew Bailey reiterated a cautious strategy towards rate cuts, citing the murky global trade landscape.

Further confidence was buoyed by a survey revealing modest growth in Britain's services sector last month, hinting at a tentative stabilization in economic performance.

(With inputs from agencies.)