It was a mixed day for sterling yesterday, with more significant falls against the euro, yen, Swiss franc and others, but recovery against the US dollar and the commodity-backed currencies such as the Aussie dollar and Norwegian krone.
Worries for anyone buying euros must be growing, with another loss of over 1.5%, taking GBP/EUR down to its lowest since December 2023, a loss of 5% in six weeks.
The story is not so much sterling weakness as the euro’s, Swiss franc’s and yen’s strength. Each has posted gains in excess of 2% against the US dollar, and other currencies, day after day this week.
Indeed, there are positive signs for the UK economy, with GDP (Gross Domestic Product) just announced to have shot upwards last month by 0.5%, taking it to 1.4% year on year. This is far ahead of expectations and in the face of the Office for Budget Responsibility’s halving of growth predictions just two weeks ago.
Thus far, the GDP result has been of minimal impact to the pound, with global economics carrying considerably more weight.
The bigger picture is that as President Trump attempts to bring industry and jobs back to the USA, with the inevitable end result of higher prices for goods for consumers – iPhone creator Sir Jonny Ive has pointed out that a US-made smartphone would cost more than three times as much – and smaller profits for business, so money has flown out of US stock markets.
The latest on tariffs is that all other countries will be paying 10% on their US exports, without the extras announced by Trump last week. Thus the UK’s previous “minimum tariff” advantage has been lost. China’s tariffs are apparently now up to 145%.
Amidst all of this, the usual data has not stopped. Ironically, given how inflationary tariffs will be, US inflation dropped significantly in March, to an annualised 2.4%, from 2.8% last month, some way below expectations. The Fed will be as gloomy as Chinese exporters at the sight of their hard work bringing inflation about to be wrecked – higher prices are expected to reach American shoppers by the end of April.
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