The British pound surpassed $1.30 for the first time since November on expectations that the UK will maintain higher interest rates compared to other major currencies throughout the year.

Sterling edged up by 0.1% to $1.3001 on Tuesday, buoyed by a weakened US dollar amid concerns over American economic growth and uncertainties regarding trade tariffs. The currency has appreciated by nearly 4% this quarter.

The Bank of England is anticipated to keep interest rates unchanged at 4.5% this week, aiming for a gradual easing in response to rising inflation and geopolitical instabilities. Traders predict a decrease of 51 basis points in borrowing costs by the end of the year, which is less than the 60 basis points anticipated from the Federal Reserve, which is also expected to maintain rates at 4.5% this week.

This disparity in policy outlook is mirrored in the bond market, with UK's 10-year bonds offering higher yields compared to US counterparts since late 2023, enhancing the appeal of the pound.

Although sentiment towards the sterling remains largely pessimistic in the options market due to global economic concerns, it is now at its least bearish levels since October.

Despite the recent contraction in the UK economy at the beginning of 2025 due to downturns in manufacturing and construction, there is optimism that the country's significant infrastructure investment plans will support economic growth.

Moreover, the UK government reiterated its dedication to US trade last week, with Prime Minister Keir Starmer affirming that all options remain on the table in responding to global steel and aluminum tariffs imposed by US President Donald Trump.