Pound (GBP) muted amid warnings of tariff-linked recession
The pound (GBP) was left rangebound at the start of this week, amid warnings that new US tariffs could push the UK into a recession.
Economists warned that the latest tariffs threatened by US President Donald Trump could cost the UK as much as 0.7% of GDP over the next few years.
Meanwhile, Sterling may waver this morning, after the UK’s latest jobs report proved mixed, with a larger-than-expected rebound in employment growth not translating into a fall in unemployment in November.
Euro (EUR) firms despite tariff threat
The euro (EUR) edged higher yesterday, with the single currency’s strong negative correlation with the US dollar (USD) lifting EUR demand, despite the risks posed by Trump’s new tariffs.
Trump has threatened to impose tariffs on European countries opposing the US acquisition of Greenland, with an additional 10% levy set to come into effect in February, and then rising to 25% by June if a deal is not reached.
Coming up, Germany’s latest ZEW economic sentiment index will be in the spotlight today, with the euro poised to climb if morale in the Eurozone’s largest economy continued to improve this month.
US dollar (USD) undermined by tariff concerns
While US markets were closed for Martin Luther King Jr. Day on Monday, a modest ‘sell-America’ bias pulled the US dollar lower.
This was unsurprisingly linked to Trump’s new tariff threat, with investors concerned this will trigger a transatlantic trade dispute and cause European nations to scale back their purchases of US Treasuries.
The reopening of US markets could inject fresh volatility into the US dollar today as American investors react to Trump’s latest tariffs.
Canadian dollar (CAD) flat as inflation rises
The Canadian dollar (CAD) traded sideways at the start of this week, as an uptick in domestic inflation helped to offset a drop in oil prices.
If oil prices continue to soften, the ‘loonie’ may face an uphill battle today.
Australian dollar (AUD) bolstered by a stronger Chinese yuan
The Australian dollar (AUD) maintained a positive trajectory in overnight trade, with the ‘Aussie’ climbing in tandem with the Chinese yuan.
New Zealand dollar (NZD) jumps on upbeat data
The New Zealand dollar (NZD) also rallied during Tuesday’s Asian trading session in response to a surprisingly strong PSI in December, which reported New Zealand’s services sector expanded for the first time since February 2024.
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