US President Donald Trump’s sweeping package of trade tariffs sent sterling to its lowest level against the euro in eight months on Friday. The US dollar was able to stem its losses on the back of strong jobs data, but serious question marks remain about its economic path, particularly with China announcing retaliatory tariffs in response to “unilateral bullying”.
Last week was one of those chaotic, unpredictable events we so often warn about. In just three days, GBP/EUR fell by more than three cents, while GBP/USD somehow ended play almost unchanged from the week prior, despite experiencing an almost 2% surge on Wednesday.
Far from being cowed by the market response, Trump doubled down on his controversial gambit. “My policies will never change”, the president said before adding “this is a great time to get rich”. Millions of Americans with battered pension funds, trading partners and many small businesses around the world will find it hard to stomach his optimism.
The International Monetary Fund (IMF) warned that the tariff package posed a “significant risk” to global trade. Stock markets certainly agreed. On Wall Street, the S&P 500 fell by another 3% as China’s response (amounting to an identical 34% levy to the one imposed by the US) pointed to a massive trade war. Early signs from Asia this morning point to the rout extending into this week.
The price of Brent Crude, a key indicator of economic activity, tumbled a further 7.5% to below $65 per barrel. Some market analysts believe commodity markets are actively pricing in a global recession, an eventuality that seems altogether likelier than a few short days ago.
This week will undoubtedly be dominated by tariffs once again. A few economic events promise to divert attention and contribute to yet more volatility. The UK reports February’s GDP data on Friday, while the US dollar will be impacted by Federal Reserve minutes and inflation figures on Thursday afternoon.
If all this has merely served to pique your interest, you’ll be able to read our April-June Quarterly Forecast in just a few days. Be sure to grab your copy to read detailed analysis of how all this could impact your budget, as well as potentially mark a new chapter in global history.
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