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The UK scrambled to get clarity on America's new tariff regime to start the week.
Donald Trump’s tariff agenda looks set to dominate another week in currency markets. Although sterling strengthened slightly against its main rivals to start the week, there was a sense that the latest twist in the trade war could come back to haunt Britain.
That’s because places like China, India and potentially the European Union may ultimately benefit from the US Supreme Court’s decision on Friday. The UK previously had a hard fought (and comparatively friendly) trade agreement in place. But would that agreement be honoured moving forward? Nobody seemed to know, leading Downing Street to issue a rare warning of retaliation against the White House.
As the situation escalated and anxiety increased, the one thing markets lacked was clarity. Safe-haven investments like gold and silver enjoyed a strong start to the week as stocks tumbled.
A 15% levy on American imports would mark a 50% increase in the effective tariff rate, UK businesses pointed out. That could be bad news for exporters of steel and aluminium, previously shielded after negotiations in the spring of 2025. However, after much gnashing of teeth, the new set of tariffs were implemented at 10% just after midnight, a full 5% lower than Trump had threatened over the weekend.
There wasn’t much data to get in the way of the main story. It’s a pretty quiet week all told, with the highlight sure to be President Trump’s state of the union address to Congress this evening. If that’s anything like his speech last Friday, we can expect more aggressive rhetoric and threats of ‘obnoxious’ retribution, as he put it on Truth Social yesterday afternoon.
It was quite an awkward time for the G7 to gather on Monday, but gather they did. European nations urged the United States to treat them ‘fairly as partners’ in order to provide clarity to the business community.
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GBP: Feeling the heat
Sterling faces a tricky week this time out. Number 10 was unusually forceful in its language around American trade tariffs yesterday, which could well have an outsized impact on the UK economy. There’s also the little matter of the Gorton & Denton by-election to negotiate as well, a vote projected to yield a damaging defeat for the incumbent Labour party.
GBP/USD: the past year
EUR: Survey points to growth ahead
Yesterday’s German Ifo business climate survey should put some wind in the euro’s sails. With that key datapoint reaching its highest level since August, the numbers suggest the German economy is growing at roughly 0.4% to start the year, according to research from Deutsche Bank.
GBP/EUR: the past year
USD: 150 days of uncertainty
The US dollar weakened against a basket of rival currencies on Monday. A main factor in its recent slump has been the lack of clarity around tariffs. The president’s 15% workaround will last a maximum of 150 days, at which point Congress will be allowed to weigh in. Nobody knows what the effective tariff rate will be tomorrow, let alone in five months’ time.
EUR/USD: the past year
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