Tariff chaos weighs on the dollar

Currency recap

USD suffered steep losses last week falling more than 3%, and registered its weakest weekly performance since November 2022, as fears of a US economic slowdown intensified.

In an interview over the weekend Trump declined to be drawn on whether the US could face a recession stating, “There is a period of transition, because what we're doing is very big. We're bringing wealth back to America". Adding to slowdown fears, Friday’s US monthly employment report came in weaker than forecast with the unemployment rate ticking up to 4.1%.

Federal Reserve Chair Powell offered little in the way of comfort to markets, stating the US central bank does not need to be in a hurry to adjust interest rates and that uncertainty around Trump administration policies and their economic effects remains high.

Elsewhere, EUR notched up its best week in 16 years as EU fiscal expansion and hopes of a Russia-Ukraine peace deal grew.

Today's GBP rates

What we think

Market volatility has increased dramatically over the last few weeks as geopolitics and on/off trade tariffs continue to roil markets. Macro-economics have largely taken a back seat recently, but the upcoming release of US inflation data on Wednesday will likely influence the tone of next week’s Fed interest rate decision, where rates are expected to be left unchanged. The run of recent poor US economic data has now led markets to price in three rate cuts for this year.

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