Dollar Uncertainty, Sterling Struggles, and Global Tariff Tensions

Dollar uncertainty and volatility has continued into Wednesday as traders were still left guessing on the Donald Trump’s plans for tariffs and what impact this may have on trading partners. Late last night, Trump stated their were discussions around imposing 10% tariffs on goods imported from China from February 1st, crucially the exact same day he said both Canada & Mexico would face tariffs of 25%.

Europe have so far been left unscarred right now, with Trump yet to indicate the level of tariff set to be implemented on their goods. He did however go as far to confirm that importers of European goods will be hit with duties. 

We have also seen a bit more of a dip in Sterling exchange rates as Public Sector Net Borrowing has again increased in December 2024 with official figures showing an increase in debt by over £3bn. A lot of this can of course be attributed to further public sector investment, a pledge committed in the most recent budget. But with The UK economy flatlining and in-directly driving bonds and yields up, Pound Sterling has suffered off the back of this due a lack of confidence from traders and investors. This continuing theme is only putting Rachel Reeves under further pressure to act sooner rather than later, and it now looks increasingly likely that interest rates will be cut at the next Bank of England meeting in February.

We round the week off on Friday with another Central Bank meeting. The Bank of Japan are set to raise their rates by 25 basis-points, with markets currently pricing in this move at 80%. Unless markets spring a surprise, the rates of 0.5% will be the highest levels of borrowing costs set out by the government since 2008 which should in turn provide a little breathing space for The Japanese Yen.

GBP/EUR 1.1822 GBP/USD 1.2347 GBP/AED 4.5363
GBP/AUD 1.9651 GBP/CHF 1.1168 GBP/CAD 1.7691
GBP/NZD 2.1756 EUR/USD 1.0432 GBP/ZAR 22.8230

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