Sterling was on track for its biggest quarterly rise against the dollar in more than two years on Monday, aided by weakness in the dollar across the board and optimism over a trade deal between the United States and Britain.
The pound has been among the top beneficiaries of the “sell America” narrative that has dominated much of market sentiment over the past six months, as investors worry that U.S. President Donald Trump’s erratic style of policymaking could trigger a U.S. recession that hurt global economies.
The British currency is on track for its strongest quarterly performance since October 2022, having gained about 6% against the U.S. dollar. It has appreciated more than 9% during the past six months.
On Monday, the pound see-sawed between marginal gains and losses and was last down 0.1% at $1.3705, having rallied over the past two weeks. Against the euro, the currency slipped, with the euro last up 0.2% at 85.59 pence.
Investors were also looking favourably upon British assets, as Britain was first among global economies to strike a trade deal with the United States.
An agreement to lower U.S. tariffs on some industrial items from Britain also came into effect on Monday.
Sterling keeps climbing on struggling dollar
“The UK was first out of the block in terms of getting a deal signed with the United States, although there is still going to be pockets of uncertainty to some sectors,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.
“Even so, it has again brought more stability in terms of the relationship that the UK has with the U.S… compared to the European Union, where there (are) still no agreements.”
Meanwhile, data confirmed that the British economy grew at its fastest pace in a year in the first three months of 2025, though signs of softening consumer demand could potentially weigh on the economy in the months ahead.
Markets are pricing in the likelihood that the Bank of England could deliver 50 basis points worth of interest rate cuts by December, with the first expected in September, according to data compiled by LSEG.
Other British assets were also poised to finish the quarter on a strong note, with domestically-exposed FTSE 250 mid-cap stocks set for their best quarterly performance since October 2020.
