Pound Steadies Amid Tariff Worries: UK Eyes US Economic Alliance; Inflation Debated

The British pound has shown resilience, gaining 0.1% against the dollar to reach $1.2747, despite market volatility triggered by new U.S. import tariffs. These tariffs have heightened concerns about a potential global recession.Prime Minister Keir Starmer has affirmed the UK's commitment to establishing a strong economic partnership with the United States, while also working to lower trade barriers with other key global partners. Despite the tariffs, the UK faces a 10% levy on exports to the U.S., which is lower than the 20% imposed on EU exporters.Economists are largely in agreement that the tariffs will negatively impact economic growth in both the U.S. and the UK. However, there is less consensus regarding the medium-term effects on UK inflation and government borrowing. A notable increase in 30-year UK gilt yields, rising nearly 20 basis points, signals market apprehension about possible loosening of fiscal regulations.Analysts at FX broker Monex suggest that this yield spike reflects market concerns over potential fiscal adjustments. Traders are also anticipating a potential interest rate cut by the Bank of England as early as May, aimed at mitigating the effects of the tariffs on the slowing economy. The pound's inherent volatility as a "high beta" currency has contributed to its decline against the euro.