Pound (GBP) supported by hopes of strong UK-US ties
The pound (GBP) outperformed many of its peers on Monday as markets remained optimistic that UK-US trade relations will remain stable under Trump’s leadership.
This followed comments from Trump suggesting a trade deal with the UK could be ‘sorted out’ and that he was ‘getting along very well’ with UK Prime Minister Keir Starmer.
This positive sentiment could continue to support Sterling today. However, any further gains may be limited as investors grow cautious ahead of the Bank of England’s (BoE) upcoming interest rate decision on Thursday.
Euro (EUR) slides as Trump threatens EU tariffs
The euro (EUR) came under pressure at the start of the week as Trump turned his focus to the EU in his latest trade threats.
Following the weekend’s tariff announcements on Mexico, Canada, and China, Trump declared that tariffs on the EU were ‘definitely coming’ and would be introduced ‘very soon’.
The threat of a transatlantic trade conflict is likely to keep EUR on the back foot today, as markets increasingly bet on further interest rate cuts from the European Central Bank (ECB).
US dollar (USD) mixed as trade tensions persist
The US dollar (USD) strengthened on Monday as heightened global trade tensions prompted investors to seek safe-haven assets.
However, these gains were later trimmed after Trump unexpectedly agreed to delay implementing tariffs on Mexico and Canada.
Looking ahead, US-China trade concerns could continue to buoy the US dollar today, while the latest US job openings and labor turnover survey may lend further support if it shows job vacancies remained robust in December.
Canadian dollar (CAD) tumbles on tariff anxiety
The Canadian dollar (CAD) struggled at the start of this week, as markets reacted to concerns over the economic impact of Trump’s proposed tariffs on Canada.
A last-minute decision to postpone the tariffs may offer the ‘loonie’ some respite today, though CAD investors are likely to remain on edge.
Australian dollar (AUD) hit by escalating trade dispute
The Australian dollar (AUD) faced broad losses overnight as tensions between the US and China flared, following Beijing’s retaliation against Washington’s new 10% tariff that came into effect on Tuesday.
New Zealand dollar (NZD) pressured by market caution
The New Zealand dollar (NZD) also weakened in overnight trade, as a deterioration in risk sentiment weighed on demand for the risk-sensitive currency.
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