Yesterday the story was all about the US dollar coming under pressure once again from the continuing trade war. GBP/USD hit its best rate since January 2022, and the dollar lost more than 1% against leading currencies, taking its decline since the start of 2025 to more than 10% against the euro and 8% against the pound.
However, air strikes overnight from Israel against Iran’s nuclear facilities and senior military commanders have sent nervous investors back to the dollar and GBP/USD has lost around three quarters of a cent.
Yesterday the British economy recording a fall in April’s Gross Domestic Product (GDP) figures. The 0.3% month-on-month drop in GDP surprised the markets – although a smaller drop had been expected. While this will put more pressure on the Bank of England ahead of next week’s interest rate decision, the next cut is not expected until September.
Britain’s trade deficit almost doubled between March and April. This can largely be blamed on a £2bn fall in exports to the USA, and potentially a sign that countries hit by US tariffs are dumping goods on the UK instead.
There was some good news though, as the FTSE 100 closed at a new record high. And in a sign that business has a grim sense of irony, the troubled discount store chain Poundland was sold, for just under a pound.
Next week is a busy one, with interest rate decisions on both sides of the Atlantic and no doubt more tariff troubles.
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