Growth concerns intensify as tariff wars ramp up

Yesterday's currency recap

Currency markets were largely rangebound yesterday as softer than forecast. US inflation data provided some much-needed temporary relief from the escalating fears that trade tariffs will take a big bite out of global growth.

Trump's increased tariffs on global U.S. steel and aluminium imports took effect on Wednesday, drawing swift retaliation from Canada and Europe, with the EU threatening to respond with like-for-like countermeasures.

The European Central Bank's (ECB) Nagel has warned US tariffs could push Germany into a recession this year, which would mark the first time since the reunification in 1990 that Germany would register three consecutive years of declining GDP. Adding to the slowdown fears, France downgraded its GDP forecast for this year, along with a host of US investment banks who have taken an axe to their US GDP forecasts for 2025.

Markets will be closely watching today’s US Producer Price report where inflation is expected to ease slightly from the previous month's reading.

Today's GBP rates

Key data points

Today's speeches

• ECB’s De Guindos

What we think

Concerns over global growth has rendered monetary policymakers largely unable to guide markets as to the path of future interest rate moves. Yesterday, ECB President Lagarde commented that the bank “cannot provide forward guidance but must be clear about reaction function”. Another ECB member stated that it was “irrational to commit to future rate decisions”.

Elsewhere, the Bank of Canada (BoC) cut interest rates by 0.25% as expected, taking the current base rate down to 2.75%. The reduction was largely a response to concerns around the recently increased US tariffs putting a dent in Canada's GDP.

Read more about the ECB and BoC's interest rate decisions here:

• When is the next ECB interest rate decision?
• When is the next Bank of Canada rate announcement?

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