How the FX market has responded to Trump

History shows us that whenever there has been a global stock market sell-off, the safe haven currencies (USD, CHF & YEN) rise in value. This is because these currencies are the most traded and therefore seen as the safest. 2 of the 3 have followed this usual trend today, but the main one has done the opposite..

The US Dollar has been initially devalued by a further 1% following the confirmation of Trump's tariffs, even though all global stocks and markets have tumbled. 99% of the time this never happens. So why has it this time?

Mainly because the decision will hurt (at least initially) the US. Inflation will rise, growth will slow and recession and stagflation could become a serious problem. Plus, how other nations view the US now will have serious ramifications on the USD & trade. Trump has literally ripped up the rule book and no-one knows really what happens next.

Another extremely surprising event has been with the GBP v EUR rate. Yesterday, the pair touched its psychological barrier of 1.20 after a steady couple of weeks. However, instead of kicking on following the tariff divergence between the EU & UK as expected, 1% has been lost..

From what we understand, the hope that the EU & US can negotiate a better deal (energy the main component) has increased. Meaning the damage caused to the EU compared to the UK will be closer together than initially thought when tariffs were first announced (which saw the € weaken). 

Financial markets were relatively calm in the build-up to yesterday, but volatility exploded overnight and has continued into today. All currencies have either won or lost heavily against another and traders preparing for what comes next; which countries accept the news & which retaliate (and make things worse).

Now is not the time to bury your head in the sand or turn away from Trump news, as we all will be affected in someway from his decisions (pensions, taxes, costs etc) and this is all still in the early phase. For those with larger currency exchanges in the pipeline without a plan, please contact us now and lean into our experience during uncertain times.