British Pound Slides as UK Faces Pharma Tariff Threat
In the face of new challenges to UK pharmaceutical profits, the British pound declined by 0.5%, closing at 1.3402 dollars, as shifting sentiments were influenced by economic data, interest rate decisions, trade policies, and other expectations.
The US threat to impose new tariffs from next week on branded drugs, trucks, and kitchen cabinets has raised fresh concerns for the UK pharmaceutical industry, which remains excluded from Keir Starmer’s US tariff deal agreed five months ago.
Trump promised the UK “preferential treatment” on pharmaceutical tariffs in May but has yet to deliver on his pledge.Trump says US will impose new tariffs on heavy trucks, drugs and kitchen cabinets
Trump unveiled sweeping import tariffs, including 100% duties on branded drugs and 25% levies on heavy-duty trucks and 50% on kitchen and bathroom cabinets which will come into force on 1 October.
Trade tariffs is putting UK under undue stress as Britain will face 100% tariffs on pharmaceuticals imported into the US under President Donald Trump’s latest plan.
Trump announced on Thursday that he was imposing a 100% tariff on pharmaceutical imports, which would apply to companies unless they establish a manufacturing presence in the US.
The EU and Japan are exempt from the new tariff threat, as both negotiated trade deals that capped pharmaceutical duties at 15%, Reuters previously reported.
Although Britain was the first nation to strike a trade deal with Trump, the pharmaceutical tariff rate remains under negotiation. Pharmaceutical imports from Britain accounted for about 3.3% of total US pharmaceutical imports in 2024, according to US trade data.
FX market data showed the Pound US Dollar (GBP/USD) exchange rate slipped by 0.50% on Friday following economic data release and twist in forex market conditions.
The US dollar swung to fresh 2025 lows before staging a sharp rebound, while Sterling slipped. The Fed cut rates, the Bank of England opted for caution with a steady hold, and the Bank of Japan kept policy unchanged but signalled that future hikes remain on the table.
On Friday, the US Dollar (USD) strengthened after upbeat data that kept Sterling in tight edge. Durable goods orders surged from -2.8% to 2.9%, far exceeding forecasts of -0.5%.
DXY dollar basket made a new 2025 low following the Fed’s rate cut, but then bounced up strongly again. In the week, the US dollar exchange rates staged a robust rebound on speculation that a lasting bottom may have formed.
After weeks of weakness, the greenback bounced from post-FOMC lows, supported by hawkish remarks from Federal Reserve Chair Jerome Powell and fresh pressure on the euro following soft German data.
The Pound to Euro (GBP/EUR) exchange rate has dipped to 8-week lows below 1.1440 following a disappointing reading for the latest business confidence survey.
RBC Capital Markets does not expect the Pound will make much headway and has an end-2026 GBP/EUR forecast of 1.15, but this is a notable upgrade from the previous forecast of 1.11.
RBC notes that there are significant Pound risks surrounding the fiscal outlook, especially with the impending budget in late November.
There are strong expectations that the government will have to increase taxes further to prevent breaking fiscal rules, especially if growth remains weak.
The bank notes that there has been another episode of the Pound losing ground in tandem with a sell-off in bonds due to fears over the debt profile.
These concerns will come into greater focus ahead of the budget, potentially increasing pound vulnerability. RBC also notes that the level of interest rates will make the pound an attractive carry currency, which will offer important support at times.
As far as the ECB is concerned, RBC expects that the ECB will resist further interest rate cuts amid a stronger economic outlook, and this will provide net euro support. The bank, however, still has reservations over the underlying growth outlook. Femi Otedola Stake in First Holdco Rises with N1.21bn Shares Purchase
