Pound (GBP) firms on hopes UK will avoid Trump’s ire
The pound (GBP) fared better than most of its peers on Monday amid hopes that US-UK trade relations will remain amicable under Trump.
This comes as Trump suggested a deal could be ‘worked out’ with the UK and that he was ‘getting along very well’ with UK Prime Minister Keir Starmer.
This optimism may continue to underpin Sterling sentiment today. Although the Pound’s upside potential may be capped as GBP investors start to turn cautious ahead of the Bank of England’s (BoE) interest rate decision on Thursday.
Euro (EUR) pressured by EU-US trade war fears
The euro (EUR) stumbled during yesterday’s session after Trump expanded his tariff rhetoric to include the EU.
Speaking late on Sunday, just a day after imposing tariffs on Mexico, Canada, and China, Trump stated that tariffs on the EU were ‘definitely coming’ and would be implemented ‘pretty soon’.
Fears of a potential transatlantic trade war are likely to weigh on EUR sentiment today, particularly as this is likely to stoke expectations for additional interest rate cuts from the European Central Bank (ECB).
US dollar (USD) fluctuates amid global trade uncertainty
The US dollar (USD) saw notable gains on Monday as fears of a global trade war saw investors favour the safe-haven currency.
The majority of these gains were then reversed later in the session after Trump agreed to delay the tariffs on Mexico and Canada.
Coming up, US-China trade war fears may underpin the US dollar today, with the latest US job openings and labor turnover survey potentially offering additional support if it reports US job openings continued to rise in December.
Canadian dollar (CAD) sinks amid tariff concerns
Unsurprisingly, the Canadian dollar (CAD) got off to a dreadful start this week, amid fears over how the potential impact Trump’s tariffs will have on the Canadian economy.
A last-minute delay to the tariffs will earn the ‘loonie’ a reprieve today, but CAD investors are likely to remain cautious.
Australian dollar (AUD) pressured by US-China trade tensions
The Australian dollar (AUD) trended broadly lower overnight amid rising trade tensions between the US and China, after Beijing retaliated against the new 10% US tariff that came into effect on Tuesday.
New Zealand dollar (NZD) pressured by risk-off flows
The New Zealand dollar (NZD) also stumbled in overnight trade as US-China trade war fears undermined market risk appetite.
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