A new dawn, a new day

Yesterday's currency recap

Whilst stocks continued to climb from their recent lows, FX moves were a bit more muted across the G10, as can be seen in the table below.

GBPUSD remains near a month low and GBPEUR found support from the August 2024 lows. GBPAUD and GBPNZD continued to trade near 10-year highs.

Today's GBP rates

What we think

Markets have taken note of the impact of tariffs on US inflation with inflation swaps now pricing-in CPI at 3.55% by the end of this year. That’s up from 2.94% priced-in in March. Current CPI in the US is 3%. This conflicts with interest rate swaps pricing-in 90bp worth of cuts this year. With CPI projections climbing, there's a compelling case that the market may have overestimated the extent of rate cuts. Should these expectations adjust towards fewer cuts, the USD stands to gain.

Equities took a risk-off tone overnight after the reciprocal tariffs kicked in for roughly 60 countries, and the US imposed 104% tariffs on China. US treasuries sold off as did the US dollar. However, we are seeing some recovery in equities this morning.

Another quiet calendar today over European trading hours but we do have the FOMC minutes in the evening – but the outcome of this is outdated considering recent tariff announcements.

Today's European trading hours promise a calm atmosphere, yet the spotlight will be on the Fed minutes this evening. However, with the latest tariffs trade developments, the outcome will most likely be outdated.

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