The Pound gained slightly against the Dollar on Wednesday, as growing uncertainty over US trade policy kept the greenback under pressure overall. However, weaker UK inflation data led to a decline in the Pound against the Euro.

UK inflation eased to 2.6% in March, down from 2.8% in February, falling short of analysts' expectations of 2.7%, according to the Office for National Statistics. This was the slowest rate in three months and lower than the anticipated 2.7%.

A key measure of services inflation, which the Bank of England is closely watching, also slowed to 4.7% annually in March, down from 5% in February and below the expected 4.8%, Reuters news agency reports.

The Pound rose by 0.3% at the time of writing to $1.3267, reaching its highest level against the Dollar in six months.

However, Sterling was weaker against the Euro, which gained 0.5%, reaching 85.66 pence.

Price pressures are expected to increase in the coming months as the effects of US President Donald Trump's tariffs begin to affect consumers.

Economists at Deutsche Bank believe that the impact of tariffs will not be significant enough to drive inflation above the Bank of England's current forecast of a 3.7% peak in the third quarter of this year. As a result, they suggest this should allow the Monetary Policy Committee (MPC) the flexibility to reduce interest rates as the economy slows.

“Inflation will take a big step up in April, pushing above 3.25% year on year, as energy and water bills lead inflation higher. The good news? We still see inflation running below the MPC’s forecast through Q2-25 – giving the MPC enough runway to cut rates through the year,” according to Deutsche Bank chief UK economist Sanjay Raya.

Markets indicate that traders expect the Bank of England to implement three quarter-point rate cuts this year, bringing rates down to 3.60% by December, their lowest level since January 2023.

Trump's tariff policies have created uncertainty among investors this month, raising concerns that the impact on global growth could be severe enough to trigger a recession.

The Dollar has been one of the biggest casualties of the shift toward non-US assets, falling over 4% against a basket of currencies since 2^nd April, when Trump first announced his proposed tariffs.