President Trump is not done yet as an announcement of a 25% import tariff on all vehicles into the US starts on April 3rd. This tariff is applied to pretty much anything car related (parts included) and is particularly harmful to Japan, Canada, Mexico and the EU.
Financial markets have been relatively calm to the news so far (Sterling has gained 0.5% across the board), but tension is very much building for April 2nd when most US tariffs are in place to start.
Will there be a shock to the UK next week with a surprise VAT tax or will the UK come through all this unscathed?
For now, GBP has and is benefiting from the drama and is a solid hedge from the noise against virtually all currencies. But, the unpredictability of Trump should be a concern and we can't assume anything at this point. Clarity will be provided next week and here is when we expect to see some major volatility.
Most investment banks are expecting a USD recovery in the second half of the year due to tariffs and interest rates, so £-$ could go higher still in the next couple of months. £-€ hangs in the balance with too many variables at play to offer any kind of guidance at this time.
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