The dollar’s decline under the Trump administration almost hit a stark milestone this week, with the dollar coming within a whisker of hitting a three-year low against the pound. It has recovered slightly but it’s still down nearly 10% since its January high, ahead of Donald Trump’s inauguration.
However, while this is good news for the pound’s buying power in the US, the governor of the Bank of England, Andrew Bailey, issued a stark warning to MPs yesterday. At the start of this year, the Bank intended to make multiple interest rate cuts, with Morgan Stanley predicting as many as five. But now, after all the uncertainty created by Trump’s on-again, off-again tariffs, the path to lower interest rates is muddy and treacherous.
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Bailey told MPs “the path remains downwards, but how far and how quickly is now shrouded in a lot more uncertainty, frankly”. This means anyone waiting on an interest rate cut for better terms on their mortgage, for instance, has little idea when that cheaper rate will arrive.
Meanwhile, over in the eurozone, where the European Central Bank has managed to get inflation down below its 2% target, there is a wide expectation the bank will cut interest rates on Thursday. Which may mean you will be able to hope for better mortgage terms in Europe than the UK for the foreseeable future.
Though, with Trump reigniting his trade war this week, by doubling steel tariffs and finding himself in another spat with China, any recent stability after April’s “Liberation Day” tariffs may soon be over.
Certainly, the only certainty in 2025 continues to be uncertainty.
