Markets on edge ahead of Trump's tariff announcement and global tensions
Financial markets are feeling the pressure this morning, as Donald Trump prepares to unveil a fresh round of tariffs on April 2nd, which he has named "Liberation Day." It appears the tariffs will initially affect all countries, with certain nations deemed favourable being exempted at a later stage. As a result, most stock indices have opened lower, while gold, a traditional safe-haven asset, continues to reach new record highs. Forex markets have seen only minor movements, potentially due to traders growing accustomed to Trump’s combative rhetoric, which often fails to materialise. The GBP/USD has risen to 1.2965, while GBP/EUR is up to 1.1970, suggesting the UK may have limited exposure to the proposed tariffs.
In other news, Trump has publicly criticised Vladimir Putin for not swiftly endorsing his peace plan for Ukraine. Looking ahead, key economic events this week include the Eurozone inflation data, due tomorrow, and the US jobs report on Friday, which is expected to show an increase of 139,000 jobs in March. EUR/USD is trading around 1.0820.
Pound posts gains against the Euro amidst volatility and uncertainty
The British Pound has made three consecutive weekly gains against the Euro, though the upward momentum remains fragile and susceptible to reversals. A notable example of such volatility was seen on Friday when the GBP/EUR exchange rate rallied to 1.2025, only to retreat sharply, ending the day with a modest 0.37% loss.
This highlights the unpredictable nature of recent price movements, despite the overall upward trend in the past fortnight. The Pound remains well-supported against the Euro, with potential buying support likely to emerge around 1.1943, the low from last Wednesday. As of Monday, the exchange rate is approaching this level amidst weaker global equity markets, reflecting investor unease ahead of Wednesday's U.S. tariff announcements.
Typically, market sell-offs tend to weigh on the GBP/EUR rate, suggesting downside risks as we approach Wednesday’s tariff event. Uncertainty surrounding the scale and timing of Trump’s proposed tariffs is likely to cause erratic movements, with little conviction in the currency market's response. Beyond Wednesday, it becomes more difficult to predict, as the Pound has sometimes acted as a hedge against tariff news. Given the UK’s relatively low exposure to U.S. tariffs, the Pound has occasionally found itself well-supported during tariff announcements. If this trend continues this week, a rally towards 1.2025 or even higher could be possible as the week progresses.
