The pound raced towards a three-year high against the dollar yesterday as the latest skirmishes in Donald Trump’s trade war sent the greenback tumbling.
With fears over the health of the US economy mounting, sterling rose as much as 0.7 per cent to $1.3557, while investors seeking safety pushed gold back towards its recent all-time high of $3,500 an ounce.
The dollar has fallen 9 per cent against a basket of major currencies this year and analysts at Morgan Stanley are predicting a further 9 per cent drop over the next 12 months.
That could push sterling – just below last month’s three-year high of $1.3593 – back towards $1.50.
The latest ructions on the foreign exchange markets came after Trump threatened to increase tariffs on imported steel and aluminium to 50 per cent from 25 per cent from tomorrow, dousing hopes his stance on trade was softening.
Sentiment was also hit by an escalation in tensions between Washington and Beijing – with each side accusing the other of ‘violating’ a truce – suggesting a pause on the US-China trade war has ended.
Dollar dumped: With fears over the health of the US economy mounting, sterling rose as much as 0.7% to $1.3557
‘The flip-flopping on policy looks set to continue,’ said Derek Halpenny at financial group MUFG.
‘That is likely to give investors reason to renew selling of the US dollar.’
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