Following a terrible Tuesday, the dollar continued to slide on Wednesday, hitting a four-month low against the pound. USD ended Wednesday down a further 1.3% on EUR and 0.8% on GBP. European countries enjoyed a huge boost following an historic German debt deal.
Already falling after Trump implemented 25% tariffs on Canadian and Mexican imports on Tuesday and doubled Chinese tariffs to 20%, the dollar tumbled further following the president’s address to Congress on Tuesday night. In his speech he reiterated plans for wide-ranging global import duties saying they would be implemented on April 2 and the statement sent the dollar to a four-month low.
Amid fears of a ‘Trumpcession’, Deutsche Bank says the dollar may even lose its safe-haven status.
Those worries grew when payroll operator ADP reported that there had been a slowdown in hiring in the months since Trump took office. Private employers added just 77,000 jobs in February, down from 186,000 the month before.
Speaking before the Treasury select committee on Tuesday, the governor of the Bank of England, Andrew Bailey, said Trump’s trade war posed a “substantial” threat to the British economy. Although the immediate impact of the dollar’s woes has seen traders buying sterling as they look for a more stable currency. By Wednesday’s end, the pound was up 0.8% on the dollar, and it’s 3.5% higher than this time last month.
In sharp contrast to America’s troubles, the euro had a stellar day after Germany’s Chancellor-in-waiting Friedrich Merz made an agreement with his coalition partners the SPD to set up a $500bn investment vehicle to fund infrastructure and defence spending. Investors welcomed the news fuelling the euro’s climb over the dollar.
Just last week, the euro fell because few expected Merz would be able to push such a deal through a government where his coalition holds such a slim majority. But, with the deal done, there is great expectation that Germany will be able to kickstart growth after years of economic stagnation.
With expectations of significant defence-led growth in Germany and other European countries, both the euro and sterling gained value through the day, with shares in defence companies jumping in value.
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