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Markets on edge as Trump sworn in as the 47th President of the USA

Conor Fleming
Written by
Conor Fleming

Conor Fleming

OFXpert

With 30 years of experience in the foreign exchange world, Conor spearheads initiatives to encourage businesses in Germany, Switzerland, and Austria to hedge their foreign currency risks with OFX.

| Tuesday 21 January, 2025

Daily Currency Update

Yesterday saw the release of the Producer Price Index (PPI) in Germany which fell by 0.1% on a monthly basis vs expectations for a rise of 0.3%. The Euro found some reprieve after President elect Trump did not indicate he would implement trade tariffs on day 1, rising more than 1% vs the US Dollar. The Euro has dropped over 6% on a trade weighted basis since Q4 of last year and as such may trade in a narrow range through the rest of January.

The Pound bounced back yesterday against its major peers largely because of demand for UK Government Gilts after weak retail sales in the UK surprised markets in December. The strong demand for UK Gilts has weighed heavily on borrowing costs, pushing 30 year yields to a 26 year high of 5.47% which was recorded on the 13th January this year. This move has led to a sharp move lower in the Pound in the last month.

US markets were closed yesterday in honour of Martin Luther King day. The US Dollar executed a classic "buy the rumour, sell the fact" after Trump suggested US tariffs would not be implemented on day 1, surprising markets which led to a 1% decline in the US Dollar.

Key Movers

The ECB is expected to continue lowering borrowing costs even as inflation ticked slightly higher in December. The council remain steadfast in their commitment to support growth especially in Germany, while also navigating risks from political instability which has been rife in Europe's largest economies. The ECB are also closely monitoring global trade tensions, fiscal policy shifts and geopolitical risks.

The Bank of England Deputy Governor, Sam Woods, said on Monday that they are open to discussions with Britain's Government about new ways to boost economic growth by loosening regulatory requirements for the financial sector. Woods cautioned that Britain should avoid a "race to the bottom" on financial regulation amid concerns the US may now opt-out of reforms designed to strengthen the World's banking system.

As Donald Trump 2.0 begins financial markets are giving the US Dollar their strongest backing since 2016. The bullish Dollar trade has had a remarkable run since September of last year citing a strong economy, "higher for longer" US interest rates and a Trump victory. It would be prudent to note that the mighty US Dollar maybe mighty but may also be getting a little ahead of itself having rallied over 10% since Q4 of last year.

Expected Ranges

  • GBP/USD: 1.2255 - 12305 ▲
  • GBP/EUR: 1.1810 - 1.1865 ▲
  • GBP/AUD: 1.9655 - 1.9715 ▲
  • EUR/USD: 1.0350 - 1.0400 ▲

Written by

Conor Fleming

OFXpert

With 30 years of experience in the foreign exchange world, Conor first embarked on his financial career journey as a trainee dealer in BNP Paribas in the early 90s. His professional journey also took him to New York, where he assumed the role of Head of Sales with an Irish bank for a few years. During his tenure at both banks, he was invited to several interviews on Irish television to discuss market turbulence, the factors driving volatility and insights into what could be expected as events unfolded.

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