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Trump tariffs rock the currency markets

Daily Currency Update

Trump tariffs have dominated the weekend headlines. US President Donald Trump has hinted the European Union could be next to face tariffs after imposing 25% levies on goods from Mexico and Canada, with China seeing an additional 10% tax on imports. Despite Trump stating he believed both the UK and EU to be ‘out of line’ on trade, he believed a deal with the UK can be resolved.

Some 20-member EU states exported more to the US than they imported in 2023, with Germany having the largest surplus, with large car and machinery exports. The news has hit the stock markets and in turn the currency markets also.

 

Key Movers

Macroeconomic data on Friday showed German January inflation offered some relief to the European Central Bank. The prelim German CPI saw a drop in headline inflation to 2.3% year-on-year, from 2.6% year-on-year in December. While gasoline prices continued to increase in January, household energy prices were down compared with last year. The US also provided a inflation update on Friday in the form of core PCE price index month-on-month. It showed inflation has festered in core services, seeing no real progression in the past 12-months. As a result, overall inflation indices, including the PCE price index, have started accelerating again on a year-over-year basis which justifies the FED’s pivot to wait-and-see on future interest rate decisions.

USD is stronger across the board this morning, with the EUR dropping to 1.0210 and the GBP 1.2250. GBP/EUR, with the tariffs expecting to favour the UK over the EU, has jumped above 1.2000 again this morning.

Expected Ranges

  • GBP/USD: 1.2210 - 1.2340 ▲
  • GBP/EUR: 1.1970 - 1.2050 ▲
  • GBP/AUD: 1.9890 - 1.2125 ▲
  • EUR/USD: 1.0090 - 1.0250 ▲

Written by

Alex Hartley

OFXpert

Driven by a passion for currency markets and data movement, Alex finds great appeal in the dynamic nature of the industry. With over 20 years of experience, Alex works closely with businesses to understand their foreign exchange requirements and align them with solutions. Placing a strong emphasis on customer service, he takes pride in nurturing long-lasting relationships with clients.