The pound led on the dollar and the euro on Wednesday, first strengthened by defence spending and then bolstered by Trump’s plans to slap tariffs on European goods. The eurozone was deeply impacted by the news, with EUR losing 0.27% against USD and more than 0.3% on GBP.
The pound was strong throughout Wednesday, first bolstered by Tuesday’s news of increased military spending, which saw Keir Starmer reveal plans to increase the Ministry of Defence’s budget to 2.5% of GDP by 2027.
Then, early yesterday morning, Gatwick airport said it would propose a new runway that could be completed much more quickly than Heathrow’s expansion. The move could contribute to the county’s much-needed growth.
But a major motivator for the market’s enthusiasm for the pound on Wednesday could well be that it was outside the trade spat between the US and EU.
The dollar started the day poorly, driven down by data showing a 10% reduction in US home sales. However, it climbed in the evening after Trump told press he intended to impose 25% on EU imports, a bloc he says was “formed to the screw the US”. He didn’t give details, but the implication was the new duties would be widespread.
Europe, already reeling from Tuesday’s terrible German consumer confidence survey, which showed falling faith in the country’s financial outlook, struggled to keep pace with the dollar after Trump’s announcement. While EU leaders have said they would retaliate to any tariffs, the market sees no winners in a trade war.
Later today the US will release trade activity data and the latest GDP growth figures. Despite yesterday’s climb, the dollar has struggled this week as it’s battled a Wall Street slump. With so many factors impacting the value of the dollar, euro, and pound there is a great deal of volatility in the market currently.
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