The value of the pound has jumped after Donald Trump’s officials confirmed that he will not announce new tariffs immediately upon taking office.
Officials told The Wall Street Journal that new taxes on imports would not be among the swathes of executive orders Mr Trump is expected to sign when he returns to the White House as the 47th US president on Monday.
Mr Trump will instead direct federal agencies to evaluate US trade relationships with China, Canada and Mexico, officials confirmed. He had previously said he would impose tariffs on all three countries on his first day in office.
The softer stance helped the pound to rally 1.1pc against the dollar to nearly $1.23 on Monday afternoon, having earlier traded as low as $1.217 ahead of the inauguration. Global stocks also rallied.
Sterling’s rally was driven by a weakening dollar. The US dollar has surged since the election of Mr Trump in November, amid expectations that a global trade war would stoke inflation and prompt the US Federal Reserve to keep interest rates higher for longer.
Mr Trump called tariffs “the most beautiful word in the dictionary” while on the campaign trail and vowed to impose import taxes of up to 60pc on China.
However, traders cemented bets on the Fed reducing borrowing costs by July following the briefings from officials, which raised hopes of a softer stance from Mr Trump in office.
Francesco Pesole, forex strategist at ING, said: “Markets were pricing some risk of an executive order on tariffs, which will not take place.”
The tariff delay helped lift the FTSE 100 share index in London by 0.4pc, near to all-time highs. The Dax stock market in Frankfurt hit a new record. US markets were closed for Martin Luther King Day.
While campaigning, Mr Trump promised to introduce blanket tariffs of at least 10pc on all foreign imports. Analysts had warned that these plans threatened to cost British industry $3bn (£2.5bn) a year.
Cars, aerospace, pharmaceuticals and machinery are among the sectors set to be hit hardest, according to analysis by Boston Consulting Group.
Jonathan Reynolds, the Business Secretary, admitted last week that a potential “tariff war” with Mr Trump was worrying to the British Government.
However, he insisted that the UK was “well-prepared” if the then president-elect does follow through on his threats.
