Pressure on the pound set to continue as US D-day tariffs approaches

Daily Currency Update

As we begin a trading week that is light on the data front from both the UK and the US, focus will be predominantly poised on global trade relations, trade deals and tariffs as Trump’s 90-day pause is set to expire on Wednesday.

Sterling has started the week in the red against the majority of its peers as the markets are left uncertain on what to expect from Trump and the US. Over the weekend we had confirmation from the President that the implementation of higher tariffs is set to take place on August 1^st.

With negotiations ongoing at this stage, there is still opportunity for trade issues to be settled. This is an outcome that would be welcomed by the majority of market participants, however it is likely that regardless of the outcome, Trump may continue to threaten fresh tariffs throughout his second term as he sees their use as an important policy tool.

Typically, the US dollar has weakened as a result of trade/tariff news due to its impact on consumers and businesses being widely seen as negative, however today the buck has strengthened on the news suggesting that the clear-cut FX market relationship that dominated H1 may not be so straight forward as we move into the second half of the year.