Pound Rallies on Dollar Weakness as Funding Questions Linger

The British pound's recent rally has been largely driven by the decline of the US dollar rather than any significant improvement in the UK's economic fundamentals, according to market analysts. As of mid-March 2025, GBP/USD has climbed to approximately 1.29, up from 1.24 at the start of the year.

The analysts point out that the dollar index has fallen by 3% over the same period, attributing the pound's strength more to dollar softness than to any marked improvement in the UK's economic outlook. The Bank of England has maintained a cautious stance with inflation still above target, while the Federal Reserve has been under pressure due to expectations of rate cuts later this year.

Meanwhile, questions over the funding of Mayor Andy Burnham's ambitious transport proposals for Greater Manchester remain unresolved. Burnham had requested £1.1 billion in additional funding over the next five years but the Treasury has only confirmed a fraction of that, leaving a significant gap. The government has allocated £500 million as of this month, with the rest still under review.