Sterling jumps nearly 1% versus the Euro after Trump tariff rollout begins..
| GBP
| The Pound's slow but steady recent recovery against the Euro has today gained significant momentum. Sterling has been labelled a 'tariff trade safe haven' and has gained in value against the countries/currencies who will unlikely escape the US Presidents trade tariffs.
Trump told reporters "The UK is out of line, but I think that one can be worked out". The UK is one of the only countries in the world to have a trade deficit on goods with the US, meaning the UK imports more from the US than the US imports from the UK (£57BN v £60BN).
The UK does run a huge trade surplus with the US in terms of services (£57BN v £126BN), but services tend to fall outside the scope of tariffs. The relationship with Prime Minister Keir Starmer seems to have got off well too with Trump describing him as "very nice". So in the FX world, GBP is safe from the disruptive tariffs and the allies remain closely bonded.
Because the EU is exposed to US tariffs, GBP has gained easily on the single currency, as it has a number of other currencies such as CAD, MXN, AUD, NZD and the Scandi currencies. It does remain indifferent to the USD though and that is because of the uncertainty over what the tariffs mean to the global economy (the reason for the stock market sell-off today).
The BoE are expected to cut interest rates this Wednesday by 25bp, any deviation or policy change in the meeting after will create volatility and is therefore a risk event.
EUR
'The European Union is really out of line, it's an atrocity' said President Trump to reporters on his upcoming trade tariffs. The US runs a gigantic $300BN trade deficit with the EU and so we expect to see a 10% tariff imposed on the bloc.
However, there is a deal to be had here. The EU are desperate for energy and the US are wanting more buyers. So the 1% lost by the Euro across the board today could be short-lived if an energy deal is struck. Still, that doesn't help the Euro now and it's a 50-50 whether a further devaluation continues into the week or whether too much too soon has been lost and a pull-back is immediately on the cards.
USD
Trade wars 2.0 has begun and the USD has strengthened because of the uncertainty. A slowing global economy is firmly on the cards now and that means investors flock to safe-haven currencies for protection i.e the US Dollar.
Please check out the main events of the week below..
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