LONDON, May 22 (Reuters) – The British pound dipped slightly against the dollar but remained close to its highest level since 2022 reached the day before as hot inflation and improving relations with Europe and the U.S. continued to support the currency.
The pound was last down 0.1% against the dollar at $1.3399, having touched a high of $1.3468 on Wednesday, its strongest level in over three years.
Britain has recently looked to improve relations with the U.S. and the European Union, becoming the first nation to sign a deal with the U.S. after President Trump’s reciprocal tariffs, and agreeing its biggest reset of trade and defence ties with the EU since Brexit this week.
“The trade deals are generally good news for the pound,” said ING FX strategist Francesco Pesole. “We still think the pound is in a pretty good position.”
Sterling was up 0.1% against at 84.2 pence per euro .
A downturn in business activity for British firms eased this month, the S&P Global UK Composite Purchasing Managers’ Index (PMI) showed on Thursday, as businesses grew a little cheerier about the outlook, including fewer worries about the impact of higher U.S. tariffs.
The British currency has also been supported this week by hot inflation data, which might lower the prospect of rates cuts from the Bank of England.
The BoE’s chief economist Huw Pill said this week that a quarterly pace of cuts was “too rapid” given still strong wage pressures on inflation.
“There’s a bit of dissent building at the Bank of England,” ING’s Pesole noted.
The British central bank lowered interest rates by a quarter point to 4.25% on May 8 in a three-way split vote, with two members of the Monetary Policy Committee favouring a bigger cut, and two – including Pill – preferring a hold.
(Reporting by Samuel Indyk, editing by Ed Osmond)
