The ‘pound is a volatile cocktail’ and the clear message from the market is ‘Sterling is a risk asset’

Amid the escalating trade war, forex experts have said the Pound has now become a risk asset and that Sterling could weaken considerably if there is a global dash for cash.

They also warned rising borrowing costs will pile further pressure on the UK Government’s already precarious fiscal position, at a time when domestic confidence is through the floor due to tax rises aimed at businesses.

Views on the forces impacting Sterling and its likely trajectory from forex experts below.

Prem Raja, Head of Trading Floor at Currencies 4 You said, “Sterling is currently having a very negative reaction to the new wave of tariffs put in place by President Trump, with GBPUSD falling from 1.31 down to 1.28 and GBPEUR falling from 1.20 down to 1.16 — a 15 month low.

“It seems that traders are selling Dollars and Pounds and buying the Euro instead, and we are seeing the Euro gain the most ground against major currencies across the board. Currently it looks like this move is set to continue and we advise exercising caution when making any transactions with Sterling until the current trade wars resolve.”

Harry Mills, Director at Oku Markets added, “The clear message from the market is Sterling is a risk asset.

“Comparing the Pound against its closest peer, the Euro, we see Sterling approaching its lowest level since 2023 as investors lose confidence in the Pound’s appeal.

“Rising borrowing costs will pile further pressure on the UK Government’s already precarious fiscal position, and domestic confidence is through the floor due to tax rises aimed at businesses. Sterling has further room to fall against the Euro and Dollar.”

David Belle, Founder and Trader at Fink Money said, “Sterling and other non-USD currencies could weaken considerably if there is a global dash for cash. This occurs when investors seek safety in USD (ironically) because it is the credit infrastructure currency of the world.

“The search for liquidity will always find its way back to the USD. Currently interbank rates are higher, showing the cost of borrowing USD on a short term basis is high, highlighting this demand for overnight borrowing. In short, we are looking at a liquidity crisis.”

Tony Redondo, Founder at Cosmos Currency Exchange added, “The Pound is a volatile cocktail. It’s down to €1.15, a 15-month low against the Euro and treading water against the US Dollar and at decade-plus highs against the likes of the Aussie and Kiwi Dollars and SA Rand. Wild swings in markets continue as traders grapple with pricing the impact of the trade war.

“As investors move funds away from the Dollar, it is increasing liquidity in the Euro that is continuing to shield it from the heightened volatility seen in the markets.

“The Pound’s fate hinges on the trade war’s next act. Short-term, it’s a tug-of-war: the UK’s “light” 10% tariff sparked some relief buying, briefly hitting a 6-month high last week before the US Dollar flexed, buoyed by Trump’s growth bets and Fed caution. If Trump escalates—or the EU and China hit back harder—the Pound could slide to $1.21, especially if UK growth falters more.

“Yet, a de-escalation (say, Trump’s team eyeing “critical imports only” tariffs) could lift it to $1.3250. Volatility is the only sure bet.”

Gabriel McKeown, Head of Macroeconomics at Sad Rabbit said, “The pound could emerge as an unexpected point of stability in currency markets roiled by escalating trade tensions between the US and China, given its relative insulation.

“It’s worth remembering that Britain came out relatively favourably in the first round of tariffs, with the joint lowest tariff levels globally, half that of the EU. And with over 70% of FTSE 100 revenues derived from non-US markets, Britain’s primary index finds itself uniquely buffered against the ongoing demand disruptions across the Atlantic.”