Sterling rises against weaker dollar as UK-EU agree trade reset
The pound rose against a weaker dollar and fell against the euro on Monday after Britain agreed a major trade and defence reset with the European Union, though FX market attention stayed on U.S. developments.
Britain agreed the most significant reset of ties with the European Union since Brexit on Monday, removing some trade barriers and collaborating on defence but also touching on sensitive issues including fishing rights.
The pound was last up 0.91% versus the dollar at $1.34015, having briefly touched its highest level since April 30. Meanwhile it fell 0.31% against the euro to 0.8421.
Neil Wilson, UK investor strategist at Saxo Markets, said the market seems to like the deal overall, but focus remains on the U.S. dollar.
"I feel like this is a little ripple to the main tidal wave of U.S. debt selloff and dollar-led moves - gilts are getting hammered and no amount of fish is going to fix that," he said.
The dollar fell against a range of currencies including the euro and the yen on Monday after a surprise downgrade of the U.S. government's credit rating while trade tensions also continue to weigh on the greenback.
Rising U.S. 10-year treasury yields - last up 10.5 bps to 4.54% on Monday - could have a potential knock-on effect for sterling via the gilt market, said Saxo's Wilson.
After upbeat GDP data last week boosted the pound, traders are now looking ahead to UK CPI due on Wednesday for a steer on the potential trajectory of the Bank of England (BoE). Traders are currently betting on a 25bps cut at the BoE's next meeting in June.
(Reporting by Lucy Raitano; Editing by David Evans)
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
The National
an hour ago
- The National
US and Chinese trade negotiators hold talks in London
The US and China held talks in London on Monday in an effort to preserve a fragile truce on trade. US Treasury Secretary Scott Bessent, Commerce Secretary Howard Lutnick and Trade Representative Jamieson Greer led the delegation from Washington. It is understood they met China's Vice Premier He Lifeng, a respected negotiator, and Commerce Minister Wang Wentao. The talks lasted for several hours and took place in Lancaster House, a historic building close to Buckingham Palace. There was no early indication on what direction the tariff talks would take, with one British official telling The National 'this is quite a sensitive topic', as both sides worked through issues late into the afternoon. But the UK attempted to smooth the way in a meeting between British Trade Secretary Jonathan Reynolds and Mr Wang, before the talks with the US delegation began. US economic adviser Ken Hassett told CNBC on Monday that he was looking for a 'handshake' that China would increase the supply of rare earth materials, which are vital to America's economy and have civilian and military uses. He hoped the discussions in London would be 'a short meeting with a big, strong handshake … that's what we're expecting'. There was optimism of progress ahead of the talks, with Beijing on Saturday approving some applications for rare earth exports, while US aviation company Boeing is to begin sending commercial jets to China for the first time since April. China also "wants the US to rethink immigration curbs on students, restrictions on access to advanced technology including microchips and to make it easier for Chinese tech providers to access US consumers", said Kathleen Brooks, research director at XTB. "The outcome of these discussions will be crucial for market sentiment," she added. The inclusion of Mr Lutnick, whose agency oversees export controls for the US, shows how central rare earth materials have become. China holds a near-monopoly on rare-earth magnets, a crucial component in electric vehicle motors. Mr Lutnick did not attend the talks in Geneva. Meanwhile, Wall Street stocks nudged upwards marginally, with investors hoping for significant progress that could help economies of both countries, as well as the global outlook. Mr He, who led his country's negotiating team in Geneva in May, is at the head of Beijing's team in London. 'The meeting should go very well,' US President Donald Trump said in a post on his Truth Social platform. While the British government has repeated it is not involved in the content of the discussions, the Prime Minister's official spokesman said 'we are a nation that champions free trade'. "The UK welcomes to these talks," he added. "We're a nation that champions free trade and we have always made it clear that trade wars are in nobody's interests.' The talks in London come a matter of days after Mr Trump and Chinese President Xi Jinping held their first publicly announced phone call since the Republican returned to the White House. Mr Trump said the call, which took place on Thursday, reached a 'very positive conclusion'. Mr Xi was quoted by state news agency Xinhua as saying that 'correcting the course of the big ship of Sino-US relations requires us to steer well and set the direction'. The call came after tension between the countries increased, with Mr Trump accusing Beijing of breaching a tariff de-escalation deal reached in Geneva in May. 'We need China to comply with their side of the deal. And so that's what the trade team will be discussing' in London, Ms Leavitt said. In April, Mr Trump introduced sweeping worldwide tariffs that hit China hardest. At one point, the US imposed levies on China of 145 per cent, as both sides engaged in tit-for-tat escalation. China's countermeasures on US goods reached 125 per cent. After two days of talks in Switzerland last month, the two sides agreed to reduce their tariffs for 90 days. But differences over certain issues have persisted, including China's restrictions on the export of rare earth minerals used in technology products. The impact of the tariffs was reflected in the latest official export data released on Monday in Beijing. Exports to the US fell by 12.7 per cent in May, with China shipping $28.8 billion worth in goods. This was down from $33 billion in April, China's General Administration of Customs has said. Throughout talks with the US, China has opened discussions with other trading partners, including Japan and South Korea, in an effort to build a united front to counter Mr Trump's tariffs. On Thursday, Beijing turned to Canada, with the sides agreeing to regularise channels of communication after a period of strained relations. China is expected to host a summit with the EU in July, marking 50 years since Beijing and Brussels established diplomatic ties.
Zawya
2 hours ago
- Zawya
Italy and Israeli Paragon part ways after spyware affair
ROME: Italy and Israeli spyware maker Paragon said they have ended contracts following allegations that the Italian government used the company's technology to hack the phones of critics, according to a parliamentary report on Monday and the company. Both sides said they had severed ties, giving conflicting accounts that triggered widespread criticism from opposition parties in Italy, while the journalists' federation FNSI called on prosecutors to investigate to ascertain the facts. An official with Meta's WhatsApp chat service said in January that the spyware had targeted scores of users, including, in Italy, a journalist and members of the Mediterranea migrant sea rescue charity critical of Prime Minister Giorgia Meloni. The government said in February that seven Italian mobile phone users had been targeted by the spyware. At that time the government denied any involvement in illicit activities and said it had asked the National Cybersecurity Agency to look into the affair. A report from the parliamentary committee on security, COPASIR, said on Monday that Italian intelligence services had initially put on hold and then ended their contract with Paragon following a media outcry. It was unclear when the contract was ended. However, COPASIR recalled that, addressing parliament on February 12, the government had said that it was still in place. The committee also added it found no evidence that Francesco Cancellato, a reported target and editor of investigative website Fanpage, had been put under surveillance using Paragon's spyware, as he had alleged to Reuters and other media outlets. In a statement quoted by Fanpage, Paragon said it stopped providing spyware to Italy when Cancellato's alleged involvement became public, and said the government declined an offer to jointly investigate whether and how he was spied upon. The company did not reply to requests for comment from Reuters. Opposition politicians called on the government to clarify the matter in parliament. Meloni's office declined to comment. The COPASIR report said Italy's domestic and foreign intelligence agencies activated contracts with Paragon in 2023 and 2024 respectively and used it on a very limited number of people, with permission from a prosecutor. The foreign intelligence agency used the spyware to search for fugitives, counter illegal immigration, alleged terrorism, organised crime, fuel smuggling and counter-espionage and internal security activities, COPASIR said. It added that members of the Mediterranea charity were spied on "not as human rights activists, but in reference to their activities potentially related to irregular immigration", with permission from the government. Undersecretary Alfredo Mantovano, Meloni's point man on intelligence matters, authorised the use of Paragon spyware on Mediterranea activists Luca Casarini and Beppe Caccia on September 5, 2024, the report said. Mantovano was not immediately available for comment. A Sicilian judge last month ordered six members of Mediterranea, including Casarini and Caccia, to stand trial on accusations of aiding illegal immigration, the first time crew members of a rescue vessel have faced such prosecution. All have denied wrongdoing. (Editing by Timothy Heritage and Frances Kerry)
Zawya
3 hours ago
- Zawya
Dollar steady as traders await details from US-China talks
SINGAPORE: The U.S. dollar was steady on Tuesday in tight trading as Washington and Beijing remained locked in trade talks that left investors on edge and hesitant in placing major bets while looking ahead to U.S. inflation report later in the week. Top economic officials from the world's two largest economies sought to defuse a bitter dispute that has widened from tariffs to restrictions over rare earths, with trade talks extending to a second day in London. The talks come after U.S. President Donald Trump and Chinese President Xi Jinping spoke by phone last week and at a crucial time for both economies, which are showing signs of strain from Trump's cascade of tariff orders since January. The lack of firm details from the talks despite positive notes from some officials and Trump meant the currency markets were frigid in Asian hours as traders held their position, reluctant to make major moves. The U.S. dollar was little changed against the yen at 144.57 in early trading. The euro last fetched $1.1425 and sterling was 0.1% firmer at $1.3563. "The extension of talks and some positive soundbites from the U.S. officials could offer short-term relief, markets are unlikely to buy into this optimism without real structural progress," said Charu Chanana, chief investment strategist at Saxo. Washington and Beijing are trying to revive a temporary truce struck in Geneva that had briefly lowered trade tensions and calmed markets. "Unlike the Geneva talks, where tariff relief provided easy wins, the London talks are now tackling thornier issues like chip export controls, rare earths, and student visas," said Chanana. "These are long-term, strategic matters—not easily resolved over a few days. That makes it harder to deliver a positive surprise." The Australian dollar, often seen as a proxy for risk sentiment, was flat at $0.652, while the New Zealand dollar was a touch firmer at $0.6058, staying close to the seven-month peak it touched last week. The dollar index, which measures the U.S. currency against six other units, was steady at 98.986, not far from the six-week low it touched last week. The index is down 8.7% this year as investors flee U.S. assets worried about the impact of tariffs and trade tensions on its economy and growth. Investor focus this week will be on the consumer price index report for May, due on Wednesday. The report could give insight into the tariff impact at a time investors are wary of any flare-ups in inflation. The CPI report will be one of the last key pieces of data before the Federal Reserve's June 17-18 meeting, with the U.S. central bank widely expected to hold rates steady. Fed officials have signalled that they are in no rush to cut interest rates and signs of economic resilience will likely cement their stance, but traders are pricing in nearly two 25-basis point cuts by the end of the year.
