HG MARKETS:

The GBP/USD currency pair extended its downward trajectory during the Asian trading session on Wednesday, declining to approximately 1.3580. The sustained depreciation in the Pound Sterling (GBP) reflects the increasing strength of the US Dollar (USD), underpinned by a resurgence in risk-averse investor sentiment. This trend has been further intensified by recent geopolitical and trade developments. On Tuesday, during a cabinet meeting at the White House, President Donald Trump announced his intention to implement a 50% tariff on copper imports, although he refrained from specifying a timeline for enactment, according to Reuters.

President Trump articulated the policy as part of a broader strategy to enhance domestic copper production and mitigate reliance on foreign suppliers, particularly from Chile, which currently accounts for nearly half of the United States’ copper imports. The proposed tariff would align copper with the existing 50% import duties on steel and aluminum, thereby marking a significant escalation in the United States’ protectionist trade posture. These developments have contributed to renewed volatility in commodity markets and have reinforced the demand for the USD as a safe-haven asset.

Complementing these trade measures, US Treasury Secretary Scott Bessent reported that the federal government has already accrued approximately $100 billion in tariff revenues in 2025, with projections indicating a potential increase to $300 billion by year-end. This forecast reflects the intensification of trade actions under the current administration and further supports the USD’s relative strength in the global currency market.

Conversely, the British Pound continues to face downward pressure, driven by mounting concerns over the long-term sustainability of the United Kingdom’s fiscal framework. The Office for Budget Responsibility (OBR) has issued a comprehensive warning regarding the structural vulnerabilities of UK public finances. The report cites the rising costs associated with an aging population, increasing healthcare and pension liabilities, and the fiscal implications of the climate crisis as central risks to fiscal stability.

Richard Hughes, Chair of the OBR, projected that public debt could exceed 270% of GDP by the early 2070s if current expenditure trajectories remain unaltered. In addition to demographic pressures, the evolving global security environment and rising demands for defense expenditure are expected to exacerbate fiscal pressures, thereby compounding the UK’s long-term economic risks and contributing to sustained weakness in the Pound.