Pound (GBP) unfazed by trade concerns
The pound (GBP) strengthened against many of its peers yesterday amid hopes that the UK is less vulnerable to US tariffs than other economies.
US trade policy is expected to have a notably negative impact on China, the EU and Canada. Meanwhile, GBP investors are hopeful that the UK economy will be relatively unharmed, with Trump saying there’s a ‘very good chance at arriving at a very good deal’.
Turning to today, a speech from Bank of England (BoE) Deputy Governor Dave Ramsden could lend GBP support. Ramsden said that upside risks to inflation now require a ‘gradual and careful’ approach to further rate cuts.
Euro (EUR) dented by EU-US trade war fears
The euro (EUR) faced pressure yesterday as Trump threatened the EU with tariffs of up to 25%, potentially hurting the Eurozone economy.
However, despite these fears EUR was able to hold steady or even inch higher against some of its weaker peers, such as AUD and NZD.
Germany’s latest inflation figures could drive EUR exchange rates this afternoon. Signs of stubborn inflation in the Eurozone’s largest economy could support the euro, while a softer reading may dent it.
US dollar (USD) leaps as Trump says tariffs will go ahead
The US dollar (USD) surged higher yesterday as US President Donald Trump confirmed that delayed tariffs would come into effect next week.
Markets expect tariffs to drive up US inflation and weigh on global growth. Therefore, the prospect of elevated US interest rates and a risk-off market mood both supported the US dollar.
Looking ahead, the spotlight falls on the latest core PCE price index from the US. The Federal Reserve’s preferred measure of inflation could dent USD if easing price pressures last month revive Fed rate cut bets.
Canadian dollar (CAD) mixed amid tariff fears and rising oil
The Canadian dollar (CAD) fell against its stronger rivals yesterday following Trump’s tariff announcement, although rising oil prices helped the crude-linked ‘loonie’ rise against weaker rivals.
Canada’s GDP figures for the fourth quarter of 2024 are out later this afternoon. An expected slowdown in growth could put pressure on the Canadian dollar.
Australian dollar (AUD) hits multi-week lows on China tariffs
The Australian dollar (AUD) fell to multi-week lows overnight following Donald Trump’s announcement he will impose an additional 10% tariff on Chinese imports to the US from next week.
New Zealand dollar (NZD) drops as market mood sours
The New Zealand dollar (NZD) also slumped last night, with trade war fears sparking widespread risk aversion.
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