DeepSeek success and Trump tariff threats roils markets

Daily Currency Update

It was a volatile day on equity bourses yesterday as the success of a new Chinese generative AI chatbot, DeepSeek roiled financial markets. The app which managed to top Apples App Store, has many of the same capabilities as rivals from the US, however, it was developed for a fraction of the cost casting a huge doubt on whether the massive expenditure and therefore, valuation of many US tech giants is justified.

Leading AI chip developer, Nvidia, suffered an intraday drop of 17% which equates to around $600bn before stabilising. There was some selling of the commodity currencies as a result however, the US dollar didn't gain across the board given the large amount of US economic output that is underpinned by the tech sector and what this could mean for the economy.

The dollar has since rallied however, as more tariff talk hit the wires overnight. US Treasury Secretary, Scott Bessant has apparently floated the idea of a universal tariff on all foreign goods entering the US of 2.5%, which would rise 2.5% every month until it hit a ceiling of 20%. Donald Trump then weighed in saying he wanted tariffs targeting computer chips, pharmaceuticals, copper and aluminium first. It is clear that a clear/cohesive tariff plan is not in place yet, however the talk sent the dollar higher.

EUR/USD which was close to 1.05, is now down around 1.0425 and GBP/USD which was close to 1.25, is now back to 1.2435.