Pound Sterling Strengthens as BoE’s Pill Pushes Back on Rate Cuts and UK Secures EU Deal

Pound Sterling Strengthens on BoE’s Hawkish Tone and UK-EU Reset Deal

The Pound Sterling (GBP) rose to around 1.3380 against the US Dollar on Tuesday, supported by Bank of England (BoE) Chief Economist Huw Pill's warning against premature interest rate cuts. His hawkish remarks signaled continued caution from the BoE as inflation risks remain, reinforcing confidence in the British currency.

At the same time, the UK’s diplomatic and economic position received a boost as it reached a new "reset" agreement with the European Union (EU). This post-Brexit deal focuses on trade, defense cooperation, and regulatory alignment. Key elements of the agreement include the Sanitary and Phytosanitary (SPS) deal that removes routine checks on animal and plant products, a significant UK contribution to Eurozone defense spending, and a £360 million investment in the fishing industry.

The Pound also found support from recent UK trade deals with India and the United States, signed earlier this month. These deals, combined with stronger UK-EU ties, position Britain more securely amid rising global economic uncertainty.

Meanwhile, fresh geopolitical tensions weighed on the US Dollar after China accused the US of undermining trade talks by issuing global warnings against the use of Huawei AI chips. The negative sentiment was compounded by Moody's downgrade of the US sovereign credit rating, further pressuring the Greenback and lifting the Pound.