Sterling's Struggles: Impact of Trump's Trade War on British Pound

The pound faced a sharp decline on Monday amidst escalating worries from investors about the potential impact of U.S. President Donald Trump's trade war on global growth. Despite President Trump's recent warning of a 30% tariff on EU imports, sterling weakened against the euro, which showed a 0.3% rise to 86.915 pence.

While the euro saw a decrease against the dollar, it managed to gain traction against the pound and other growth-related currencies like the Australian and New Zealand dollars. Britain, with a limited trade deal with the United States, faces pressure to reach agreements before August 1 to avoid heavy levies.

Investor concerns are increasingly focused on the UK's economic stability, especially after the government's failure to implement promised welfare cuts. The pound, closely linked to volatile commodity currencies such as the Aussie and kiwi dollars, dropped 0.3% to $1.3446 by late London trading. Economic indicators show the UK economy contracted for a second month, with inflation expected to rise further, fueling expectations of a Bank of England rate cut.

(With inputs from agencies.)