Excel Currencies Blog

Both the Canadian Dollar & Mexican Peso recovered from multi-year lows yesterday, after both Canada & Mexico prevented 25% tariffs on their exports to the US.

But what does this have to do with the Pound you ask?

Well firstly, just to highlight once again that Donald Trump brings market volatility to financial markets and what he both says and does impacts UK/£.

Yesterday, £-€ jumped 1% before falling 0.5% throughout the day and £-$ initially dropped over 1% and later clawed the same back. All because of US tariffs which had nothing to do with the UK.

The UK looks to be exempt from US tariffs and so economically we should see no change in the trading dynamic and environment with the US. However, globally US tariffs cause a problem.

If the world suffers from these tariffs (likely), the Pound will lose value to safe-haven currencies (USD, CHF, JPY). Sterling may gain on the Euro, but if a deal is struck between the EU-US on energy, we will see a reversal. 

The Pound has outperformed since the trade wars started as the UK isn't directly involved, but as the currency is sensitive to global risk (risk sentiment will probably turn sour from here), downside risks remain elevated as the trade war escalates. 

China's response today to the US was expected, but what happens next is difficult to predict. This means timing exchanges right, becomes almost impossible for individuals and businesses alike.

The hypersensitive environment is here to stay and therefore all bets are off. Hedging and Forward Contracts are therefore essential to minimize downside risks to all.