Sterling slips as U.S. tariff jitters prevail

By Greta Rosen Fondahn

(Reuters) - The pound fell against the dollar on Tuesday, looking set to break a three-day rising streak, as U.S. tariff threats retook the focus of currency investors after Monday's selloff in technology shares and a rush to safe-haven assets.

The greenback, which roared ahead after the U.S. election in November, has been under pressure recently, as the concrete tariff plans investors had braced for did not materialise after the inauguration of President Donald Trump.

Expectations that trade policies under Trump could boost U.S. growth, but also push up inflation, had left markets betting on higher-for-longer interest rates, which in turn supported the dollar.

On Monday, Trump said he planned to impose tariffs on imported computer chips, pharmaceuticals and steel.

The Financial Times also reported on Monday that Trump's pick for Treasury secretary, Scott Bessent, has been pushing for universal tariffs on U.S. imports, which would start at 2.5% and rise each month.

This gave renewed support to the greenback against a broad range of currencies, while markets looked set to remain jittery.

"After the last few days of more targeted tariff proposals on individual countries, this was a signal in the opposite direction," said Michael Pfister, FX analyst at Commerzbank.

"Until the tariffs are officially implemented, there is a good chance of volatility."

Sterling fell 0.6% against the greenback to $1.2426, after gaining over the past three sessions.

The pound has climbed around 2% higher since Trump took office last week, but sterling is still tracking a fourth month of losses against the dollar after it hit a 14-month low on Jan. 13.

On Monday, markets flocked to safe-haven currencies like the Japanese yen and the Swiss franc, as investors sold off tech stocks.

Chinese startup DeepSeek's free open-source AI model raised questions about the sky-high valuation and dominance of U.S. AI bellwethers.

Sterling was broadly unchanged against the yen, after falling 0.8% versus the Japanese currency on Monday.

The euro also held steady at 83.83 pence.

C.BANKS AHEAD

Investors are eyeing a string of central bank meetings this week, with the U.S. Federal Reserve expected to hold rates steady on Wednesday, while the European Central Bank is seen cutting rates on Thursday.

The Bank of England will announce its policy decision next week and money markets price in a 87% likelihood that the central bank will cut rates by 25 basis points.

Pepperstone senior research strategist Michael Brown predicted that the BoE would ease rates and banked on more rate cuts ahead.

"A gradual, predictable pace of quarterly 25bp cuts remains the base case for now," Brown said.

"Though risks to this scenario do tilt in a dovish direction, were labour market weakness to dent demand to such a significant degree that the pace of services disinflation markedly quickens."

(Reporting by Greta Rosen Fondahn; Editing by Amanda Cooper and Ed Osmond)