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Sterling Stronger, Supported by Global Market Optimism
Published by Global Banking & Finance Review®
Posted on July 23, 2025
2 min readLast updated: January 22, 2026
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Sterling strengthens with global market optimism after US-Japan trade deal. Analysts predict a positive outlook for GBP as rate differentials favor the pound.
Sterling stronger, supported by global market optimism
Impact of Global Trade Deals on Sterling
LONDON (Reuters) -Sterling firmed against the dollar and the euro on Wednesday helped by the optimism across global markets after the U.S. and Japan struck a trade deal which boosted stocks and currencies, such as the pound, which can move with global growth expectations.
The pound was last marginally higher against the dollar at $1.3540, its highest in nearly two weeks, and working its way back towards early July's near four-year top of $1.3787.
It strengthened more against the euro, which was down 0.24% at 86.62 pence.
Market Reactions to Trade Agreements
The big story for markets on Wednesday was a trade deal between the United States and Japan that lowers tariffs on auto imports and spares Tokyo from punishing new levies on other goods in exchange for a $550 billion package of U.S.-bound investment and loans.
That boosted stocks globally, and other risk-friendly currencies such as the Australian and New Zealand dollars, as well as the pound. [AUD/]
Analysts' Predictions for GBP
While the pound is still down against both the euro and dollar in July, some analysts see better days for it ahead, as markets look past the volatility in Britain's bond market at the start of the month caused by fiscal concerns, which weighed on the currency.
BofA analysts said in a note the third quarter promised to be better for the British economy.
"We feel the conditions are now in place for a bounce in GBP through the summer months," they said.
"We do not understate the fragile state of UK public finances but continue to be struck by how markets are willing to find the UK guilty of fiscal breaches before being (given) the opportunity of proving innocence."
They also flagged that rate differentials were moving in the pound's favour, and that "tariff attrition in other countries will eventually materialise."
Upcoming Economic Indicators
Thursday's business activity data, and Friday's retail sales data will give the latest indications of the health of the British economy.
(Reporting by Alun JohnEditing by Tomasz Janowski)
Key Takeaways
- •Sterling strengthened against the dollar and euro.
- •US-Japan trade deal boosts global markets and currencies.
- •Analysts predict a positive outlook for GBP in the coming months.
- •Upcoming UK economic indicators will provide further insights.
- •Rate differentials are moving in the pound's favor.
Frequently Asked Questions about Sterling stronger, supported by global market optimism
1What is Sterling?
Sterling is the official currency of the United Kingdom, often referred to as the British pound. It is symbolized by '£' and is subdivided into 100 pence.
2What is currency hedging?
Currency hedging is a financial strategy used to protect against potential losses due to fluctuations in exchange rates. It involves using financial instruments to offset currency risk.
3What are economic indicators?
Economic indicators are statistics that provide information about the economic performance of a country. They include data on GDP, unemployment rates, and inflation.
4What is the impact of global trade on currency?
Global trade can significantly affect currency values, as trade agreements and tariffs influence economic growth expectations, which in turn impacts currency strength.