USD

The US dollar made modest gains on Wednesday as investors braced for President Trump’s imminent imposition of tariffs on automobile imports, semiconductors, and pharmaceuticals. The dollar index climbed to 104.50, reflecting a cautious mood ahead of the anticipated announcement on 2 April. In a move set to rattle global trade, Trump confirmed a 25% blanket tariff on all foreign car imports, sending shockwaves through financial markets.

Equity markets reacted negatively, with technology stocks bearing the brunt of the downturn. Tesla and Nvidia saw sharp declines of over 5.5%, dragging the Nasdaq down by 2%. The S&P 500 and Dow Jones also retreated, abruptly ending a three-day rally as investors weighed the potential ramifications of escalating trade restrictions. The bond market mirrored this sentiment, with Treasury yields dropping as investors sought the safety of government securities amid heightened uncertainty.

As global markets remain on edge, investors are closely monitoring the potential fallout—ranging from supply chain disruptions to corporate earnings pressures and retaliatory trade measures. The coming days will prove crucial in determining whether this latest tariff dispute is a temporary blip or the start of a more protracted economic challenge.

GBP

The UK Chancellor’s Spring Statement offered little in the way of optimism, yet one silver lining was the pound’s resilience alongside steady gilt performance—both shaken but far from shattered. While GBP/USD dipped below $1.2875, GBP/EUR remained steady within the €1.19-€1.20 range.

Chancellor Rachel Reeves unveiled a raft of fiscal measures against the backdrop of a downgraded economic outlook. The Office for Budget Responsibility slashed the UK’s 2025 growth forecast from 2% to just 1%, prompting the government to outline £15 billion in spending cuts, targeting welfare reforms and departmental budgets. Despite pledges to boost defence expenditure and housing initiatives, concerns persist over economic momentum and limited fiscal headroom.

Sterling was already under pressure ahead of the announcement following an unexpected slowdown in UK inflation, which eased to 2.8% in February on an annual basis. This fuelled speculation of Bank of England rate cuts, pushing yields lower and dragging the pound down. Yields briefly ticked higher when Reeves confirmed a 1.2% real-terms rise in day-to-day spending, but fell again after the government revealed a smaller-than-expected gilt issuance plan. The Debt Management Office scaled back long-dated bond sales to 13.4% from an estimated 17.2%. By the day’s close, gilts remained largely flat, while sterling saw only marginal losses against most major currencies.

The UK economy remains in a precarious position, and while Reeves has carved out some fiscal breathing space, long-term growth projections depend heavily on economic performance holding steady. Yet, despite the prevailing uncertainty, global investors are not turning away from the pound. Year-to-date, sterling has strengthened against 65% of the 50 global currencies tracked, posting a gain of over 2.5% against the US dollar this month alone.

EUR

The euro extended its losing streak on Wednesday, with EUR/USD sliding for the seventh consecutive session to the low $1.07's—marking a sharp retreat from its late-March high of $1.0950. The decline followed President Trump’s formal approval of a 25% tariff on automobile imports, heightening trade tensions and raising fresh concerns over the Eurozone’s export-driven economy.

Germany’s automotive industry, a cornerstone of European growth, finds itself in the firing line. Carmakers and suppliers are preparing for potential supply chain disruptions, while EU policymakers in Brussels weigh possible retaliatory measures. The tariffs come at a particularly delicate moment for the Eurozone, where economic growth remains fragile and inflation is finally easing—bolstering expectations of European Central Bank rate cuts later in the year.

For now, traders remain wary, with the euro under persistent pressure as markets assess the wider implications of Trump’s trade policy. Any signs of a more dovish stance from the ECB or an escalation in trade tensions could dictate the currency’s next move in the days ahead.