US GDP set to slow sharply in Q1 as focus turns to the impact of Trump trade policies
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Daily Currency Update
European Central Bank supervisor, Sharon Donnery, said yesterday that she saw scope for making banking regulation simpler, but warned against watering it down. She added that; “we must never sacrifice the resilience that was so hard-won in the aftermath of the global financial crisis, neither in the name of alleged competitiveness, nor under the banner of simplification. This is a red line and it must remain one.” The Euro remains steady after posting gains of almost 3% vs the Dollar.UK’s Chancellor, Rachel Reeves, said that improving business ties with the EU was “arguably more important” than constructing a trade deal with the United States. Britain aims to ease the impact of the Trump administrations tariffs by striking an agreement that could foster much more technology investment while also working to remove some of the post-Brexit trade barriers with the EU. Presently the Pound sits at an almost 4 year high vs the US Dollar.
The US Dollar drifted ever so slightly firmer yesterday, lifted by the Trump administrations plans to ease the impact auto duties on domestic car manufacturers as well as the prospect of more tariff deals with some trading partners. At the same time the dollar got a boost from comments by US Treasury secretary Scott Bessent, who said yesterday that the administration is making substantial progress on tariff negotiations, noting that deals are forthcoming for both India and South Korea.
Key Movers
In Europe, we will see the release of French and German inflation data later today, alongside growth data for both countries and the wider Eurozone. It remains to be seen if this data will support the case for an further rate cut by the ECB. Presently markets are pricing in another cut by the ECB this June and supporting this we saw several ECB policymakers warning that a tariff war with the US could extinguish the Eurozone’s fledgling recovery.The British Pound is struggling to post further gains as markets expectations for a rate cut this May are growing. Softer inflation expectations and rising global headwinds are fuelling these dovish bets. BoE policymaker, Meghan Greene, this week said that US tariffs may lead to lower inflation in the UK though significant risks remain regarding the broader economic impact of these and also the impact of recent tax hikes in the UK for employers after Ms. Reeves budget.
The US Dollar has suffered its worst start to any year since 1989 as the Trump administration has put forward once unthinkable economic policies, unnerving global investors. But one proposed shift would be of a different order altogether: an exit by the US, as suggested by Donald Trump, from the International Monetary Fund (IMF). Dollar Index (a basket of currencies vs the US Dollar) has shed 8.4% in 2025 and this Dollar weakness has transformed into a 15% hit for unhedged Euro and UK based companies who export. If nothing else, the fog of uncertainty surrounding Washington has seriously dented the attraction of US assets.
Expected Ranges
- GBP/USD: 1.3385 - 1.3435 ▲
- GBP/EUR: 1.1750 - 1.1800 ▲
- GBP/AUD: 2.0875 - 2.0925 ▲
- EUR/USD: 1.1370 - 1.1420 ▲