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After small rises against the euro and dollar early in the day, the pound dropped suddenly at the end of trading. As the markets closed on Monday, GBP was virtually flat against the EUR but down 0.31% on USD.
US President Donald Trump’s impending trade tariffs, which are due to come into effect tomorrow, on April 2, are having a cooling effect on markets worldwide. This is likely to be the dominating story of the week. While the dollar may be up currently, the price of gold hit another all-time high yesterday, a clear sign traders are looking for a safe commodity in which to store their money.
For the UK, the story is one of disappearing hope. Following the Prime Minister’s trip to the US last month, the UK government hoped a trade deal would see the country granted an exception from President Trump’s widespread tariffs. However, with the steel tariff already in effect and no word of a larger deal, those hopes are now vanishingly small. With 24 hours to go until Trump’s tariffs come into effect, UK stocks took a tumble, with the FTSE 100 dropping 1.2% to a two-week low.
The UK’s problems aren’t all US-grown, however. Housing figures published yesterday and this morning reveal that mortgage approvals were down £60,000 and house prices were completely flat in March, both figures were below forecast and down from the previous month. There was a big push from buyers to complete on properties ahead of the stamp duty increase that came into effect on March 31, so this decline could be a sign buyers were making more conservative offers or holding off starting the buying process to see if the stamp duty rise would be frozen.
The President’s plans are hitting the US, too, with the S&P 500 down by 1.4% and the Nasdaq down 2.4%. Goldman Sachs estimates the chance of the US economy entering a recession have increased from 20% to 35%.
This afternoon, data releases will reveal the current state of both US jobs and manufacturing. The figures are forecast to see a dip and if the drop is significant, those fears of a recession may increase.
The European stock exchanges weren’t spared, with the German DAX and French CAC both losing 2%. However, data released yesterday showed individual eurozone countries had increased retail sales and steady inflation. Later today, the wider Euro Area data is expected to show a fall in inflation.
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GBP: Double blow for the pound
The pound ended Monday flat against the euro and down against the dollar. UK markets are contending with both Trump’s tariffs and a flatlining housing market as Rachel Reeves’ October budget comes into force.
GBP/USD past year
EUR: Little growth ahead of tariffs
The euro lost ground against the dollar as fears of Trump’s tariffs gripped the market. However, signs of increased retail sales and flat inflation may give the eurozone a little hope.
EUR/USD past year
USD: Fears of a recession grow
While the dollar may be up ahead of Trump’s impending tariffs, record gold prices and shrinking stock markets suggest the market is simply investing in a safe haven currency. The threat of a recession is growing and labour data published later today may add to those fears.
USD/GBP past year
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