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.
