News

Jul 14, 2025

Sterling on the back foot as data disappoints

Sterling remains under pressure as UK economic data continues to disappoint. Friday’s GDP figures showed a 0.1% contraction in May, missing expectations for modest growth (+0.1%) and following April’s 0.3% contraction. This has raised expectations that the Bank of England may be forced to cut rates further and markets are now pricing in around a 90% chance of a cut next month. The data also raises the risk of additional tax hikes in the autumn and keeps upward pressure on government borrowing costs (Gilt yields remaining elevated and cautiously monitored by markets). As a result, the Pound has continued to underperform against most of its major peers in the past week or so. Traders will be keeping a close eye on the upcoming UK data releases to see if this pattern continues. This week sees the latest UK inflation report (Weds) and then (perhaps even more importantly) the latest UK jobs numbers (Thurs). There are growing signs that employers are reacting badly to the latest round of tax increases and therefore this release will come under even closer scrutiny than usual and should provide a clearer view of the extent of the weakness in UK economy. In other news, Trump continues to threaten very high tariffs to start in August. Notably, markets appear to be generally taking these threats in their stride (we’ve been here before I guess) and appear relatively desensitised to events on that side. Only the US Treasury market continues to send ominous signals, where long-term yields are rising in response to the latest budget bill and ballooning deficit forecasts, but even this is so far orderly. Overall, the USD has been steadily recovering from its more recent lows as the US data shows resilience and, so far, has (seemingly) not been hit too hard over Trump’s tariffs. Even feedthrough from the tariffs to inflation has been very limited so far, but this likely can’t last forever. Importers will eventually run out of the inventory they accumulated earlier in the year before the tariffs hit and prices should eventually adjust upwards (especially given strong consumer demand). All eyes will be on tomorrow’s US inflation report for clues on whether the Fed are right to keep interest rates on hold or yield to political pressure from Trump to cut rates. Tuesday’s US inflation data will therefore draw a lot of attention and provide further clues on whether the Fed are right to keep interest rates on hold or whether they should be looking to cut rates as being pushed by President Trump. As a result, the GBP/USD has lost around 3-cents since the start of July and trades around a 3-week low. The GBP/EUR has continued to slip lower and trades around a 3-mth low. The EUR/USD has steadily ticked lower to a 2.5-week low having lost around 1% this month.

Jun 10, 2025

Sterling dips as UK jobs report disappoints

Sterling has lost some ground this morning following a softer than expected UK labour report. The unemployment rate rose as anticipated to 4.6% (from 4.5%), which is the highest reading since June 2021. The data also showed that average annual earnings (inc. bonuses) dropped to 5.3% (from 5.6%) versus expectations for a 5.5% rise. Furthermore, the number of people claiming jobless benefits has jumped by 33.1K (vs. an expected 9.5K rise) which is the most since July last year. This report suggests that the government’s hike to employer National Insurance contributions and the minimum wage (which came into force in April) is causing employers to hold off on hiring and increase layoffs. This rising unemployment and softer wage inflation could likely push the Bank of England to cut interest rates sooner than expected and markets are pricing in two further rate cuts before the end of the year. As a result, the GBP/EUR rate is down half a cent this morning and trading at a 4-week low. The GBP/USD is down a cent from yesterday’s high and towards the lower end of where it’s traded so far this month. Next up on the data front we have US inflation data tomorrow afternoon, UK GDP on Thursday, and US consumer sentiment data on Friday. More importantly, headlines surrounding today’s US-China trade talks could dominate the USDs performance depending on the outcome (positive talks would likely support the USD).

May 12, 2025

USD strengthens as US & China agree to pause tariffs

The USD has strengthened today after the US and China agreed to slash tariffs on each other’s goods by 115% for a 90-day period. This means that goods imported from China into the US will now face 30% tariffs, while US exports to China will be subject to a 10% levy. Although only a temporary pause to allow for continued negotiations, this unwinding in tariffs was significantly larger than expected by markets (which was roughly around 50%) and it represents a major de-escalation in the trade war between the two superpowers. Consequently, both the USD and Chinese Yuan have strengthened, while traditional ‘safe haven’ currencies (e.g. Swiss Franc and Japanese Yen) have lost some shine this morning. As a result, the GBP/USD has dropped nearly 1.5-cents today and trades around 1.5% lower than last week’s high. Similarly, the EUR/USD has declined by around 1.5-cents from opening and now trades around 2.5% below last week’s high. Meanwhile, the GBP/EUR has gained around 1.2% higher from last week’s lows and currently trades around a 5-week high. Market participants will continue to monitor any developments over the tariff situation this week. However, a busy calendar of key economic data releases this week will also draw traders’ attention. The key data points to watch out for this week includes UK job figures (Tues), US inflation (Tues), UK and EU GDP ((Thurs), US retail sales (Thurs) and finally US consumer sentiment data (Fri).

Apr 22, 2025

Trump's Fed attacks fuel 'Sell America' trade narrative

Markets were relatively calm last week - until late on Friday, when President Trump launched a series of personal attacks against Federal Reserve Chair Jerome Powell. On his social media feed, Trump labelled Powell “a major loser” for not lowering interest rates, criticising him for being too slow to act in support of the US economy. This has raised concerns that Trump might attempt to remove Powell from his position. While the legal grounds for such a move remain unclear - and Powell himself has stated that he does not believe the President has that authority - the mere suggestion has unsettled investors. Since markets reopened on Sunday night, we’ve seen a broad sell-off in US stocks, bonds, and the USD. Generally, market sentiment remains dominated by the unpredictability of the White House, pushing economic data into the background. However, tomorrow’s PMI reports will offer a valuable first look at how much damage Trump’s erratic policy approach has done to business confidence. Recent sentiment surveys have consistently painted a uniformly bleak picture, with both consumers and manufacturers fearing rising prices/costs from tariffs. Manufacturers, in particular, are holding back on investment - an ironic twist, given this is the very sector Trump aims to support. Since “Liberation Day”, the Euro has emerged as one of the best-performing major currencies which suggests that Eurozone markets are receiving a significant part of the capital that is fleeing the US. Notably, the Euro continued to strengthen even after last week’s relatively dovish ECB meeting - underscoring investors’ growing preference for the Eurozone’s institutional stability over the US's policy turmoil. As a result, the GBP/USD rose around 2% higher from last week’s low and has traded towards the highest levels in 3-years (to around where it briefly spiked last September). The EUR/USD climbed to nearly 2.4% above last week’s low and to a 3.5yr high. Meanwhile, GBP/EUR has remained within a relatively tight range over the past week, currently trading about 1% above its recent lows.

Apr 10, 2025

Stock markets rally as Trump announces 90-day delay to reciprocal tariffs

In a dramatic turn, last night President Trump announced he was postponing (reciprocal) tariffs above 10% for most countries by 90-days – except for China, where total tariffs were raised to 125% from 104%! Markets rallied overnight and into this morning on hopes that this delay signals room for negotiation and eventual de-escalation of the situation, which will hopefully limit the global economic fallout. While there are no guarantees when Trump is involved, it seems unlikely that such extreme tariffs will remain in place, especially given the growing recession risks they pose. Trump’s change of heart is likely in response to the sharp sell-off in equities, the bond market rout and intense pressure from Republicans and resultant pressure from business leaders – a self-inflicted recession isn’t particularly the legacy the 47th President wants. Equity markets have led the gains, with US equity indices posting double digit gains last night (e.g. Nasdaq up over 12% which is the second largest on record) and Asian/European stocks rallying this morning. Safe havens like the Japanese Yen and Swiss Franc have also fallen. The Chinese yuan, however, remains at 18-year lows and tensions with China appear harder to resolve. Uncertainty remains very high and the fact that key policy decisions are seemingly being made almost entirely off the cuff (Trump’s top trade official was reportedly unaware of the delay until after announcement) is a bit unnerving. Again, there are no guarantees here (a delay is still just a delay and not a cancellation), but the fact that Trump appears open to negotiation suggests the previous sky-high average US tariffs will likely come back to more realistic/sustainable levels, which is coming as a relief to markets. As a result, the GBP/USD has recovered over 1.2% from Monday’s low and the GBP/EUR bounced around 1.2% higher from yesterday’s low. The EUR/USD remains very choppy and continuing to see-saw around the 1.10 mark. Today, we see the release of the latest US inflation figures and tomorrow we have UK GDP data. Both are likely to be very overshadowed by the more recent developments and more time will be needed to see the real impact of tariffs on inflation/growth.

Apr 8, 2025

Markets extremely volatile as fallout continues from Trump's tariffs

President Trump’s tariffs have continued to wreak havoc in financial markets. Major stock indices continued to tumble into this week as investors concerns grow over a slowdown in the global economy (albeit we’ve seen a bit of a rebound so far today). The perceived ‘safe haven’ currencies (e.g. the Japanese Yen and Swiss Franc) have been in heavy demand due to the high levels of uncertainty. Furthermore, after the initial large selloff in the USD last Thursday, the US currency has since rallied back as the sharp selloff in stock markets and risk assets boosted the safe haven appeal of the Dollar. Yesterday, China announced proposed counter tariffs of 34% and vowed to “fight to the end”, despite Trump’s warning of another 50% tariff should they not withdraw this countermeasure. The EU has taken a less aggressive approach and appears open to negotiation, while also floating the idea of potential 25% tariffs on some US goods. Interestingly, the Euro has so far been quite resilient to the tariff news even though their economy is heavily exposed to these import taxes which currently stand at 20%. Some analysts are arguing this is because the Euro is emerging as a de facto safe haven given the currency’s high liquidity and the bloc’s solid current account surplus. Surprisingly, Sterling has been among the worst performing major currencies (particularly against the Euro). We would expect the UK to be relatively isolated from the tariffs given its low exposure to global demand (particularly the US and China) and the fact they’ve been set at the lowest level of just 10%. However, investors appear to be punishing the Pound due to its high-risk status and elevated interest rates, which would allow some room for aggressive rate cuts if the Bank of England ever pressed the panic button on the growth outlook. As a result, the GBP/USD has fallen nearly 5-cents from last Thursday’s high and now trades around a 1-mth low. The GBP/EUR has fallen 3.5-cents since the tariffs announcement and trades around the lowest levels since August. The EUR/USD has swung wildly and is currently trading 2-cents down from last Thursday’s high and around a cent higher from pre-tariff announcement levels. Markets are extremely sensitive to any tariff news and currencies will likely remain very volatile as further headlines come in on any retaliatory measures and the state of negotiations.

Apr 3, 2025

Markets and USD rattled following Trump tariff announcements

Markets have been very volatile overnight following the announcement of sweeping new tariffs from President Trump. He announced a universal 10% tariff on all imported good into the US (starting 5th Apr), along with higher "reciprocal" tariffs on about 60 countries (starting 9th Apr), which includes key allies and major trade partners. Some of the notable tariffs include: - China: 34% (which is on top of existing duties and takes their total tariffs to 54%!) - European Union: 20%. - Japan: 24%. Markets had been bracing themselves for this announcement and they were steeper than many expected (particularly for China). There are now large concerns that this will lead to trade wars and that it risks sending the global economy into a negative spiral. Furthermore, although Trump’s tariffs are designed to hurt other countries, there is heightening fears that this will hit the US economy and potentially take them into a recession. In turn this would make the Fed more likely to cut interest rates. At the same time, these tariffs risk pushing up US inflation and therefore potentially creating a stagflation environment (e.g. weak growth and high inflation) which would be a very challenging situation for the Fed to navigate. Consequently, this has led to a sharp selloff in the USD overnight and into this morning. The GBP/USD has travelled nearly 2.5 cents higher since yesterday and now trades at a 6-month high (and still looks like it has some steam left). The EUR/USD has risen over 2 cents from yesterday and now also trades close to a 6-month high (and testing the market rate of 1.10). The GBP/EUR continues to trade within the familiar ranges we’ve seen over the past week or so. Uncertainty is still very much up in the air, and likely to remain high, as the market await the responses from other countries/regions (in particular Europe and China). Some US lawmakers have suggested that these are the highest the tariffs will be and then the expectations are that they will eventually get negotiated lower. However, no one is sure how long that would take to happen and therefore how much impact will ultimately be felt in the global economy before things can eventually reach a new equilibrium.

Mar 5, 2025

USD weakens as investors reassess impact of Trump's tariffs

The USD has heavily weakened this week, as concerns over the state of the US economy outweighed any fears over the global growth implications of Trump’s confirmed trade tariffs. Ordinarily, the enforcement of Trump’s trade levies should be propping up the dollar, but market participants appear to be focusing more on the impact of these restrictions on the US economy than the global one. Markets are now bracing for a possible contraction in activity in the first quarter after a key US GDP indicator fell into negative territory late-last week - partly a consequence of the Republican DOGE efforts intended to reduce waste in the US government. Investors are now betting that the Fed will need to cut rates more aggressively this year (around 3 cuts now being priced in for this year) to help stimulate the economy, which has made the USD less attractive. The relatively restrained retaliatory responses from China and Canada so far may also provide another reason why the USD hasn’t been bought back following the confirmation of these trade tariffs. Authorities there appear keen to avoid an escalation in the tit for tat tariffs that would trigger a full-blown trade war. This may keep alive the possibility for some fresh negotiations and, consequently, a potential dilution of these tariffs later down the line. As a result, the GBP/USD has risen nearly 3-cents this week and currently trades around the highest levels since mid-November. The EUR/USD has moved over 3-cents higher this week and also trades close to a 4-month high. The GBP/EUR is down around 1% this week – sitting at a 2-week low – as traders buy more heavily into the Euro than Sterling. The next bits of data are this afternoon’s US PMI figures and Friday’s EU GDP data and key US payrolls report.

Feb 28, 2025

Dollar jumps as Trump pushes on with tariff agenda

The USD rallied yesterday following fresh tariff headlines from the Trump administration. The US president unveiled fresh tariffs for China, with an additional 10% tariff announced on Chinese imports on top of the 10% already imposed at the start of the month. Markets were also surprised after he said his proposed import taxes for Canada and Mexico would go ahead as planned next week. Moreover, Trump warned (again) that EU tariffs are imminent but, so far, his posturing has not amounted to any concrete action. Despite these announcements, the moves have been relatively contained thus far which is probably due to hope that eleventh hour deals will be reached to avoid the implementation of these economically damaging trade restrictions. Let’s not forget that investors have also been burnt before and have perhaps learnt not to overreact too much to Trump’s remarks, which in the past have turned out to be largely bluster and little action. Sterling has been performing particularly well against the Euro given the UK’s apparent isolation from US tariffs and rising hopes of a US-UK trade deal following a positive meeting between Trump and Starmer yesterday. As a result, the GBP/EUR now trades around a 2-month high and only around half a cent from the highest levels since the 2016 (i.e. year of Brexit vote!). The GBP/USD rate has fallen around 1-cent in the last 24hrs and currently trades around an 8-day low. The EUR/USD has lost around 1-cent from yesterday’s high and trades around a 2-week low.