Pound edges closer to multi-year high against dollar amid erratic US tax policy

Monday 02 June 2025 6:24 pm

The pound has edged nearer to a multi-year excessive towards the greenback as buyers doubled down on predictions that the dollar would proceed to weaken into the second half of the 12 months.

Sterling was up round 0.6 per cent towards the greenback by Monday night to $1.3523, an increase of greater than 8 per cent because the begin of the 12 months. 

Additional bond market weak spot, an escalation in international commerce tensions and softer US financial information are cited by analysts as prime headwinds placing a pressure on the greenback’s power.

Morgan Stanley has projected that the greenback will sink to ranges not seen because the coronavirus pandemic by the center of subsequent 12 months, whereas analysts at Goldman Sachs pointed to ways by the White Home to tax overseas firms extra as additional purpose to be bearish on the US foreign money. 

This contains new laws handed final week often called the “Enforcement of Cures In opposition to Unfair International Taxes,” which requires increased tax charges on firms from nations whose tax insurance policies the US deems “discriminatory,” a measure analysts concern will deter overseas buyers farther from the US.

The greenback index, which measures the dollar towards a basket of currencies, has fallen round 0.6 per cent over the previous 24 hours.

‘Buck is the weakest foreign money’

Kathleen Brooks, analysis director at XTB, stated greenback weak spot is “in focus as we begin a brand new month. The dollar is the weakest foreign money within the G10 FX area this 12 months. 

“It was decrease once more for Might as an entire, nonetheless, the greenback made a comeback final week and was the highest performing foreign money within the G10 FX area. This doesn’t point out the beginning of a brand new pattern; nonetheless, it’s one thing to observe carefully. 

“We don’t assume that the greenback is ripe for a restoration right here, because the macro and geopolitical surroundings will not be supportive for greenback power. 

“Thus, the greenback may very well be consolidating earlier than taking one other lurch decrease, additionally if commerce tensions surge as soon as extra this week, and if President Trump slaps extra tariffs on different sectors or on China, then the greenback may very well be within the firing line.”