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Sterling was volatile yesterday after an interest rate cut and an initial UK-USA trade deal.
It was another turbulent day for the pound, seeing big peaks and troughs against the US dollar and euro. Following an interest rate cut and the announcement of a trade deal with the United States, it ended half a cent higher against the euro and fell by a similar margin against the US dollar.
The Bank of England announced a quarter-point cut on Thursday, bringing the interest rate down to 4.25%. Although the Bank stated its aim to cut interest rates throughout 2025, Trump’s tariffs complicated its plans. The vote was split, with two of the nine-member Monetary Policy Committee voting for a larger 0.5% cut and two voting to hold rates at 4.5%.
This morning Bank of England governor Andrew Bailey will give a speech providing further detail on the MPC’s thinking and when cuts are planned for the rest of the year. In a breakfast interview with the BBC, Bailey urged UK officials to rebuild the trading relationship with the EU.
Houses prices in the UK increased 0.3%, despite a predicted fall of 0.1%, reversing the 0.5% drop in March. The rise in stamp duty seems to have done little to deter buyers.
The other big story out of the UK on Thursday was the news of a US-UK trade deal. While it’s not as comprehensive as President Donald Trump initially claimed, the deal removes the US tariffs on aluminium and steel and reduces the 27.5% tariff on 100,000 UK-produced cars to 10%.
News of the deal, the first the US has brokered since Trump announced his worldwide tariffs, saw stocks in UK and US businesses rise. The US dollar, too, had a very strong day and made gains against a basket of major currencies. Markets were buoyed by Trump’s claims that many more trade deals with other countries are due in the coming weeks, signalling a reduction in the tariffs that have impacted global trade.
The euro struggled through Thursday, losing ground against GBP and USD. Part of the decline was driven by disappointing German trade figures. Exports increased by just 1.1%, down from March’s 1.8% and well below the 3.2% forecasts. Imports, too, were down more than 2% on forecasts, and showing a contraction in the market.
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GBP: Interest rate cuts and trade deals
Driven by a 0.25% interest rate cut and the announcement of a trade deal with the US, the pound had a good day against the euro. However, against the US dollar, sterling struggled, half a cent by day’s end. Bank of England governor Andrew Bailey is speaking later today and will shed light on when to expect future cuts.
GBP/USD past year
EUR: Bad day for the euro
The euro lost significant ground against sterling and the dollar on Thursday. Weak trade figures out of Germany did little to help. With no new data being announced in the eurozone today, the currency is at the mercy of the markets.
EUR/USD past year
USD: Dollar climbs through the day
Thursday was a strong day for the US dollar. The currency’s strong performance was driven by the announcement of a trade deal with the UK and signals from Trump that further deals were incoming, marking a possible end to the tariff chaos that’s marked his first 100 days.
USD/GBP past year
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