The gloves are off in the latest threat to global peace and security – that’s his words – as on Saturday President Trump ramped up the pressure on Denmark, Europe and NATO to hand over Greenland to the USA.
His new trade war on European countries including the UK, Germany and France could trigger an immediate response from Europe in the shape of its ‘ant-coercion instrument’ (ACI), a €93bn package of tariffs on US goods and restrictions on US companies in Europe.
The impact of all this on the currency markets has so far been muted, with little movement so far this morning.
However, there are early signs that the dollar is sinking. The normal pattern in times of economic or actual strife would be investors flocking to safe havens such as USD, but these are not normal times. (The gold price has followed the usual pattern and shot up to a new high this morning).
Even so, it promises to be a highly charged week on the currency and stock markets. Often they go hand in hand, with the pound moving up and down in alignment with share prices.
The Trump-Greenland issue is exactly what we mean by a ‘black swan’ event with the potential to drastically affect your buying power overseas. On the other hand, with the main players all meeting in Davos this week it could all be put down as a misunderstanding and smoothed over. But it may not. So, to take your own dreams and plans off the table, call your account manager on 020 8003 4915 and discuss locking in your rate. The dollar lost 14% against the euro last year – would your plans survive if the pound fell similarly?
With US economic growth far outstripping the rest of the G7, Trump is perhaps feeling relaxed about the impact of tariffs on the US economy, but for specific industries and individual businesses the impact could be great.
For the UK, the current economic picture will be revealed this week with most of the big numbers coming out, starting with unemployment and earnings tomorrow, then inflation on Wednesday and the purchasing managers index (PMI) on Friday.
While an interest rate cut at the start of February has largely been ruled out, there could still be an impact.
