Pound sterling recovers as Donald Trump's protectionism hits dollar

Pound races towards $1.26 as investors cite broad dollar selling

Reactions to the President’s first days in office suggests investors “may be losing patience”, one director said (Getty)

The pound recovered on Wednesday while the dollar fell, hit by fresh concerns of what US President Donald Trump’s policies would mean for global trade and markets.

Mr Trump, on Tuesday, told US chief executives of Ford, Fiat Chrysler and General Motors to build more vehicles in America, and renewed his pledge to build a wall along the border between the US and Mexico. The dollar lost ground following the remarks, leaving the pound around $1.2599, up 0.5 per cent on the day at its highest level against the buck since December.

The pound had fallen on Tuesday, following a Supreme Court ruling that Britain's government must go through parliament before starting negotiations around leaving the European Union.

Analysts largely attributed Wednesday’s move in the dollar to concerns about the protectionist stance Mr Trump has taken during his first few days in the White House.

“We think the main reason Sterling is performing as it has done is the same reason other currencies are buoying against the US Dollar – The Trump factor,” analysts at foreign exchange service provider Hamilton Court said in a note.

Shusuke Yamada, an FX strategist at Bank of America Merrill Lynch, told the BBC: “We retain our view that the dollar is on a longer-term uptrend. But for the moment, scepticism towards the Trump presidency retains the upper hand.”

US stock markets had been broadly cheered by Mr Trump's election victory back in November, with hopes that an infrastructure spending boost and lower regulation and taxes would lift business.

However, Kathleen Brooks, the research director at City Index, said the initial reaction to the President’s first days in the office suggests investors “may be losing patience”.

She said investors were worried about “protectionism and what a deeply unpopular president will mean for national unity and international diplomacy over the next four years”.