April 24, 2025

“The dollar has gained around 1.5% since Monday afternoon as Trump has reneged on his threats to fire Powell and hinted towards cooling trade tensions with China. It has struggled to make sustainable gains, however, and the uncertainty has kept it pinned down.”

Tim Hallinan – Trading Director

USD

Some positive news on the tariff front led the dollar higher yesterday afternoon, but the momentum has faded quickly as markets struggle to cope with the persistent uncertainty. The WSJ reported that Trump was looking at halving the duties to 50-65%, though Treasury Secretary did later clarify that this would not be ‘unilateral’ and instead would be offered as a reciprocal action to kick off negotiations on trade. There is a growing sense that markets and CEOs are beginning to restrain Trump – it was the bond market that encouraged him to delay the higher rate ‘liberation day’ tariffs, his U-turn on Fed Chair Powell came after warnings form advisors about the apocalyptic implications for financial markets, and his latest comments on de-escalation with China come immediately after meeting with high-level executives from the country’s biggest retailers. That sounds like a positive development for the dollar, but any burst of optimism has failed to last very long so far – probably because of the anticipation that the next pivot is always around the corner. Yesterday’s PMIs were a bit sad, though not particularly concerning at this stage, with services printing lower than expected at 51.4 and manufacturing propped up by tariff front-running at 50.7. In the diary today is some durable goods and unemployment claims data.

GBP

Sterling survived a relatively dire PMI print yesterday. The composite print fell into contraction and to its lowest level since November 2022 at 48.2, with businesses blaming a stall in demand from international markets as firms shun making big spending decisions amid the trade uncertainty. The survey also suggested that job cutting remains aggressive in the wake of the employers’ NI hikes, though this isn’t yet a trend that the hard data has been corroborating. BoE Governor Bailey said yesterday that the central bank needed to ‘take seriously’ the negative impact on growth that would come from fragmenting global trade. The market is fully pricing a rate cut at the meeting in two weeks’ time.

EUR

The data painted a weak picture for the eurozone economy yesterday, but EUR/USD remains dominated by the dollar headlines – its newfound status as a safe haven has much more sway than domestic macro variables right now. While the stagnant 50.1 PMI figure was around what was expected, the headline was the five-year low in confidence in the services sector. There is a German business confidence figure this morning, too, which is expected to wipe out its pre-‘liberation day’ gains that came from the huge fiscal spending plans pushed through parliament last month.

Markets

Equities surged in Europe yesterday and US stocks roared at the open as the Trump administration suggested a near-term de-escalation in the trade war. After initially rising nearly 4%, however, the Nasdaq only finished 2% higher by the end of the session, with the optimism fading as focus returned to the extreme uncertainty.

Main Economic Events (All Times CET)

10:00am: German ifo Business Climate
2:30pm: US Durable Goods Orders & Unemployment Claims

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