US president Donald Trump’s late-in-the-day U-turn had an immediate impact on the market on Wednesday evening. The euro, which had been strengthening through the week as traders looked for a safer place for their money, lost 0.9% against the pound and 0.7% against the dollar.
Wednesday began with continuing selloffs in the Asian and European markets and there were signs that traders were selling their US and UK government bonds. This lack of trust in a commodity that is effectively a financial foundation of the global economy, spread fear through the markets.
Then, after the European markets had closed, Trump announced a 90-day pause on his trade tariffs for all countries except China. He claims the world’s second largest economy had shown the US a “lack of respect”.
The impact on the US markets was immediate, with the S&P 500 soaring in value. By the end of trading the stock index was up 9.6%, one of its biggest days since the Second World War.
While European stock markets had closed, currency markets revealed relief globally. The pound, which at one point in the day reached its lowest point against the euro since January 2024, began to climb. By the end of the day, it was up 0.9% on the euro and 0.2% on the dollar.
After a week of losses, GBP is still down overall by 1.8% on EUR and USD since April 3, but it’s a welcome change of pace.
In non-tariffs news, the UK Residential Market Survey revealed that house prices have largely stalled in recent months, increasing just 2%, well below the 10% forecasts. The news, on top of all the turmoil of recent tariffs, doesn’t paint a rosy picture for UK growth ahead of Friday’s GDP numbers.
This afternoon, the US will post its latest inflation rate data. Core inflation is forecast to increase slightly, which may add to concern that the Fed won’t cut interest rates any time soon, but the numbers will also help the analysts who are trying to project whether the US economy is headed for a recession.
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