After dire growth forecasts from the Bank of England on Thursday, sterling regained much of its lost ground against the dollar and euro by end of week. However, President Trump has already upset the markets this week with a newly announced round of tariffs.
Unlike Trump’s previously proposed tariffs, which targeted single countries, the US President has proposed a 25% tariff on all steel and aluminium imports. The widespread tariffs garnered an immediate response, with South Korea holding an emergency meeting, French ministers proposing an EU retaliation and Australia trying to arrange an exemption.
In all the turmoil, the dollar rose 0.3% against the pound and euro and saw the price of aluminium rise by 0.5%.
If the tariffs go ahead, they will most immediately impact Canada and Mexico, though the effects would be felt worldwide, hitting other major exporters, such as Brazil and Vietnam. The President also said retaliatory tariffs would be announced on Tuesday and Wednesday this week, marking the start of a potential tit-for-tat trade war.
Tariffs aside, this was already a week filled with data releases that could cause significant volatility to the market. Tomorrow, chair of the US Federal Reserve Jerome Powell will answer questions on the bank’s decision to maintain interest rates despite strong economic markers. And on Wednesday, a new release on the US inflation rate will reveal some of the first data to account for changes made since Trump took office.
Outside of the US, Thursday sees the UK release GDP growth rate data, which is likely to reaffirm the Bank of England’s dismal forecasts of just 0.75% growth. And, on Friday, the Euro Area will release its own growth data. Both the UK and EU are battling worries of economic stagnation, and these data releases could give further material to already despondent analysts.
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