The British pound gained traction on Tuesday, recovering some of its losses against the euro, as market volatility that has been prevalent for the past few weeks started to fade.
On Tuesday, macroeconomic data indicated a potential weakening in the UK’s labor market ahead of a tax increase on employers this month. Despite this, wage growth in the country remained robust, posing a challenge for the Bank of England.
Current market indicators suggest that traders are 90% certain of a quarter-point cut in the interest rate when policymakers convene in early May, with an expectation of two more cuts following that.
The UK’s exposure to the fluctuating tariffs imposed by U.S. President Donald Trump is less than other regions such as China and the European Union. Yet, the rising threat of a global recession due to an escalating trade war is causing investor sentiment to deteriorate globally.
The sterling rose 0.45% against the U.S. dollar, trading at $1.3243, and also appreciated against the euro, with the EUR/GBP down by 0.5% to 85.67 pence.
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