Published: 03/02/2025 By ECAP

The British Pound has lost some ground against the Dollar but remains strong against other G10 currencies, trading like a safe haven amid President Trump’s tariff actions. In fact, the UK is insulated from U.S. tariffs due to its goods trade deficit with the U.S. and relatively low exposure to tariff impacts. Ultimately, while Trump criticized the UK, he has not directly threatened tariffs, keeping the Pound stable.

The Euro faces pressure as President Trump confirmed tariffs on the Eurozone, causing the Euro to lose ground against its peers. Trump's firm stance on tariffs, following recent moves against Canada, Mexico, and China, suggests the Euro could continue to suffer. Ultimately, currency markets are reacting to the threat, with the Dollar gaining strength as the trade war intensifies.

The U.S. Dollar surged, with the dollar index rising about 1.3%, nearing a two-year high. Trump’s tariffs on Mexico, China, and Canada are expected to be inflationary, as U.S. importers will bear the costs. This sticky inflation reduces the Federal Reserve's incentive to cut interest rates soon, potentially keeping rates high for longer. Moreover, recent inflation data further supports expectations for prolonged high U.S. interest rates.
Data supplied by GC Partners