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After dipping against the euro and dollar on Tuesday morning, the pound recovered and ended the day largely level with both currencies. Today could see that all change as US President Donald Trump unveils his ‘Liberation Day’ tariffs.
Despite hopes for a carveout from Trump’s global tariff plans, the UK government doesn’t appear to have secured a trade deal with the US. With no major data releases set for the rest of this week, the pound is very much at the mercy of the news cycle.
The Office for Budget Responsibility has been clear that any long-term US tariffs will likely eliminate the £10bn of headroom Chancellor Rachel Reeves left for herself in the October budget and reestablished through benefit cuts in last week’s Spring Statement.
In a month that also sees council tax, TV license, water and energy bill increases, the cost-of-living rises coupled with tariff-induced inflation could severely weaken the pound.
The Labour government said it plans no retaliatory tariffs, but whether that line will hold remains to be seen.
President Trump’s plans for reciprocal tariffs still lack definition, but in the past weeks he has singled out Asian and European markets as being particular targets. He claims his tariffs will come into effect immediately after announcing them later today.
The President’s plans have caused a sharp sell-off of American stocks, with the S&P 500 losing nearly 5% of its value in the first three months of 2025. There are growing fears Trump’s economic plan will lead to a US recession, with Goldman Sachs predicting the chances have increased from 20% to 35%. US labour data revealed job openings were even lower than decreased forecasts. A survey of US manufacturing sentiment also fell below forecasts and revealed the first contraction in the industry for three months.
Unlike the UK, the EU has announced plans to meet Trump tariff for tariff, with a package of import duties ready to roll out. However, much like the UK, there are no major data releases planned for the rest of the week that could disrupt the tariff story.
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GBP: No news of a carveout
The pound recovered from a dip against the euro and dollar, ending Tuesday roughly where it started. With no major new data releases planned for this week, starling is at the mercy of Trump’s tariffs.
GBP/USD past year
EUR: EU prepares to retaliate
The euro ended Tuesday slightly down on the pound and the dollar as the market prepares for Trump’s tariffs. While the President says the tariffs are global, he has singled out the EU as an intended target.
EUR/USD past year
USD: Impact of ‘Liberation Day’ to be seen
The dollar was very slightly up on the pound and euro on Tuesday as the markets await today’s tariff announcements. In fuel for the Trumpcession fears, US job openings were down in February and the manufacturing industry is contracting.
USD/GBP past year
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