Markets are fairly steady currently, amid Trade War jitters with Donald Trump officially imposing a 25% tariff on all steel and aluminium imports into the US earlier this week. With Europe set to be affected fairly heavily in particular, concerns about a tit-for-tat EU/US trade war have intensified with European Commission President Ursula von der Leyen stating the tariffs as unjustified, with damaging effects expected to the Eurozone economy. As a fallout from this, expectations for more interest rate cuts are now on the rise as the governing council attempt to help prop up growth, in an otherwise struggling economy.
Moving into this afternoon, we have the release of January’s Inflation figures. At this stage, it is expected that we see no change to the figure recorded in December at 2.9%. However, even when you strip out food and energy prices, the figure albeit slightly dropping is still expected to be above 3%. The concern for The Federal Reserve will be that Inflation is still hanging above 3% and therefore points to a reason to not reduce interest rates any further, which won’t be music to Donald Trump’s ears. With continued uncertainty around trade tariffs and policies under Trump, there is still concern as to the economic effects for The US, evident with the latest Non-Farm figures showing a decline in new jobs added and therefore markets are currently predicting a return to Interest Rate cuts in June. With another 25 basis-point cut seemingly pencilled in.
Tomorrow morning brings the latest release of GDP figures in The UK. Current expectations suggest the economy will have marginally increased year-to-date; however, it should reflect that the last quarter has been underwhelming and actually shrunk by 0.1%. The National Institute of Economic and Social Research has recently upped its forecasts for The UK, from 1.2% to 1.5% growth throughout 2025 albeit with a very real risk that any further expansions to Donald Trump’s tariffs could well slow the path of growth. With Trumps 25% tariff on all steel and aluminium imposed on Monday, 63% of UK manufacturers exporting to The US expected to be directly affected by these tariffs, whilst 34% of all UK businesses feared some kind of hit.
Continual price pressure from US Tariffs would ultimately be added to increased government spending which the NIESR has stated would act as a stumbling block for The Bank of England when considering reducing interest rates further. It would also no doubt have an impact on economic growth by slowing down business, investment and consumer spending.
GBP/EUR 1.1985 GBP/USD 1.2433 GBP/AED 4.5689
GBP/AUD 1.9812 GBP/CHF 1.1319 GBP/CAD 1.7794
GBP/NZD 2.2052 EUR/USD 1.0364 GBP/ZAR 22.9302