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What’s happening: The British pound rose sharply against the US dollar on Thursday, as investors assessed US President Donald Trump’s tariff announcements.
What happened: The sterling continued to strengthen as the UK is not facing the extent of US tariffs levied on other major economies.
Weakness in the US dollar also lent support to the GBP/USD pair during Thursday’s session.
Why it matters: The US President announced a 10% baseline tariff on imports from major nations, while increasing the rate for nations with trade surpluses. Although higher tariffs are expected to impact global trade, rates levied on the UK are much lower than other major regions. Trump announced a 34% tariff on China, 24% on Japan and 20% on the European Union.
UK Prime Minister Keir Starmer said he remains committed to negotiate a deal with the US. UK Business Secretary Jonathan Reynolds stated that while the government seeks to negotiate a deal to avoid a trade war, the UK is ready to announce retaliatory measures, if necessary.
The Bank of England is expected to announce interest rate cuts of around 62 bps by yearend, versus earlier projections of around 54 bps.
Weakness in the US dollar provided further boost to the GBP/USD forex pair. The US dollar index, which measures the greenback’s performance versus a basket of major peers, tumbled around 1% on Thursday, following Trump’s latest tariff announcement.
Meanwhile, data released by the UK on Thursday showed the S&P Global services PMI fell to 52.5 in March, versus a preliminary reading of 53.2. The UK composite PMI was also revised lower to 51.5, from the preliminary reading of 52.0. The figure was still higher than February’s 50.5.
The GBP/USD forex pair gained around 0.7% to 1.3101 on Thursday. However, London’s FTSE 100 dipped 1.55% to close at 8,474.74, while the domestically focused FTSE 250 tumbled 2.23% to settle at 19,210.51.
What to watch: Investors await the release of economic data on new car sales (1200 UAE Time) and S&P Global construction PMI (1230 UAE Time) from the UK today.
New passenger car registrations in the UK, which fell by 1% year-over-year to 84,054 units in January, are expected to tumble by 7% in February. The S&P Global UK construction PMI, which declined to 44.6 in February from 48.1 in the previous month, is projected to increase to 46 in March.
Context: US equity markets fell sharply on Thursday amid macro uncertainties caused by the Trump administration’s tariff plans.
Details: Investors shorted risky assets and flocked towards safe havens on Thursday, after US President Donald Trump announced a blanket 10% tariff on imports from around 185 nations and higher rates for major trading partners.
Big tech stocks, which had been on a broad uptrend for several years, tanked on Thursday. Shares of Amazon and Apple tumbled around 9%, while Nvidia’s stock lost 8%.
The consumer staples sector, which is considered a defensive play, bucked the overall market trend, gaining around 0.7% on Thursday. The sector’s performance was also boosted by Lamb Weston’s earnings call. Shares of Lamb Weston jumped 10% after the company reported stronger-than-expected third-quarter results and issued upbeat sales guidance for fiscal 2025.
The Dow Jones index tumbled 3.98% to close at 40,545.93 on Thursday. The S&P 500 fell 4.84% to 5,396.52, while the Nasdaq 100 dipped 5.41% to settle at 18,521.48.
What to watch: Investors await the release of economic data on US nonfarm payrolls (1630 UAE Time), unemployment rate (1630 UAE Time) and average hourly earnings (1630 UAE Time) today. Analysts expect the US economy to add 135,000 jobs in March, lower than the 151,000 job adds in February. The unemployment rate is expected to remain steady at 4.1%, while average hourly earnings are projected to increase by 0.3% in March, in-line with February’s rise.
Federal Reserve Chairman Jerome Powell’s speech will also remain in focus today. Traders are looking forward to four rate cuts this year, which will support US stock market sentiment.
Other Markets: European indices closed lower on Thursday, with the FTSE 100, DAX 40, CAC 40 and STOXX Europe 600 Index down by 1.55%, 3.01%, 3.31% and 2.57%, respectively.
Russia is looking to add 150,000 soldiers in its war with Ukraine this year. The news sent the RUB/USD pair lower in forex trading this morning.
Philippines’ annual inflation rate eased to 1.8% in March, from 2.1% in the previous month. The region’s inflation hitting the lowest level since May 2020 lent support to the PHP/USD forex pair.
Japan’s household spending declined by 0.5% year-over-year in February following a 0.8% gain in the previous month. This being the first decline in personal spending since November sent the JPY/USD pair lower in forex trading this morning.
Mexico’s gross fixed investment tumbled by 6.7% year-over-year in January. This being the steepest decline since January 2021 exerted pressure on the MXN/USD forex pair.
Brazil’s S&P Global services PMI climbed to 52.5 in March, from 50.6 in the previous month. The region’s services activity surging to a four-month high sent the BRL/USD pair higher in forex trading this morning.
Italy’s retail sales (1200 UAE Time), Mexico’s foreign exchange reserves (1500 UAE Time) and consumer confidence (1600 UAE Time), India’s foreign exchange reserves (1530 UAE Time), Turkey’s foreign exchange reserves (1530 UAE Time), Canada’s unemployment rate (1630 UAE Time), employment change (1630 UAE Time), participation rate (1630 UAE Time) and average hourly wages (1630 UAE Time), US Baker Hughes oil rig count (2100 UAE Time) and Baker Hughes total rigs count (2100 UAE Time), as well as Brazil’s balance of trade (2200 UAE Time).
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