Sterling slipped back within its 30-day Bollinger Band, unable for the third straight session to sustain gains above 1.35 as easing global trade tensions have shifted focus back to fiscal risks, which has longer-term gilt, Treasury, and JGB yields rising.

Since President Trump's 2025 inauguration, the dollar has weakened amid erratic tariff announcements, spurring a surge in USD short positioning and demand for alternative assets like gold and cryptocurrencies.

Major currencies such as the pound, euro, and yen have posted modest single-digit gains versus the dollar in 2025. In contrast, bitcoin and gold have soared 16.14% and 26%, respectively—suggesting eroding faith in monetary and fiscal authorities’ ability to manage inflation and growth.

Notably, the dollar’s drop has come alongside a 76bp rise in 10-year U.S. Treasury yields from post-"Liberation Day" lows. Sterling, meanwhile, climbed six big figures during this yield rise, defying the usual currency-rates correlation.

UK gilt yields have risen only 6bp over the same stretch, possibly reflecting fears of a U.S. policy misstep that could reignite inflation and complicate U.S. deficit financing.

The GBP/USD retreat from 2025 highs near 1.36 coincides with receding U.S.-China and EU trade tensions. There is a question as to how comfortable investors will be in holding dollars, and to a lesser degree other currencies, amid such uncertainty. The sharp rallies in gold and crypto suggest confidence is waning.
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FX Majors Performance w/BTC, XAU:


(Paul Spirgel is a Reuters market analyst. The views expressed are his own)