ACM Update 28-04-25
We will hit 100 days of Trump 2.0 this week, and the President’s actions continue to ripple through financial markets. Recent IMF meetings have led to slashed global growth forecasts due to tariffs, with the US economy projected to suffer the most. With trade tensions between the US and China cooling slightly though, the Dollar made its first weekly gain since March.
The new week starts with recent incumbent Mark Carney hoping to lead his party to victory in a US-dominated Canadian election. Beyond that, we have a raft of European public holidays on Thursday, before April’s US jobs data in the form of Non-Farm Payrolls is released on Friday.
At the risk of sounding like a broken record, tariff to and fro has continued to dominate markets. But the slight softening of US-China tensions was enough to provide the Dollar with a bit of a boost last week. A midweek announcement on the US “considering” slashing China tariffs to de-escalate the current trade war, boosted the greenback.
China had equally granted some tariff exemptions to the US by the end of the week, calming matters further. Overall, this produced a modest weekly gain for the first time since Trump’s new trade measures were implemented earlier this month. However, China is still returning up to 50 jets back to Boeing, as a result of increased tariff costs. The plane manufacturer is the US’ biggest exporter.
In the same announcement to soften Chinese tariffs, Donald Trump also backtracked on his recent attacks on Federal Reserve Chairman, Jerome Powell. The ongoing battle between the pair had previously spooked markets, but the President confirmed he has “no intention of firing” Powell. Whether he ever had the authority to do so, is questionable.
Trump did suggest that he would like the Fed Chair to be “a little more active” on cutting interest rates though. Cautiously chosen words from Trump, whatever next.
Other news stories were less Dollar-favourable. From the latest round of IMF (International Monetary Fund) meetings, came an updated global growth forecast. The global projection was slashed as a result of Trump’s tariff war, whilst the US forecast for 2025 went from 2.7% in January to 1.8%. The IMF’s Chief Economist believes the global economy is being “severely tested once again”.
In terms of other data, US Consumer Confidence figures remained weak again in April, as trade tension concerns seem to rippling all the way down to end users. The metric has now been dropping for four straight months. The Federal Reserve’s Beige Book release also pointed towards tariff uncertainty throughout the economy.
Fed policymaker Christopher Waller spoke last week also. His comments suggested concern that tariffs could lead to a sharp rise in unemployment, especially interesting given the latest jobs data for April arrives this Friday.
Waller’s suggestion was that interest rate cuts could be necessary from such a change in the jobs market, but that the Fed will focus on the data. His feeling was that the committee can’t afford to stand by and view tariff inflationary pressures as transitory.
As Trump hits 100 days in his second Presidency this week with “a lot of things happening”, the Dollar remains in yo-yo territory. The movements of GBP-USD last week can be seen below:
The UK was also caught up in the bad news from the IMF last week, seeing a direct impact from the fallout of the tariff situation. The country’s GDP is now only expected to grow by 1.1% this year, down from 2.6% a few months ago.
UK budget deficit news was unveiled, displaying a far larger shortfall than projected. The overshoot was almost 15 billion greater than what had been forecast, meaning the third highest year for Government borrowing on record. With Rachel Reeves’ figures so tight, the release was heavily scrutinised and led to some GBP negativity as a result.
Even Friday morning’s blockbuster of a Retail Sales figure did little to boost GBP against other majors. Sunny weather during March provided a boost in the garden centre segment, as well as in clothing and DIY-related items. Sales of food items fell back however. The Retail Sales metric thus recorded a 0.4% monthly increase, versus the -0.4% expected.
The lack of movement from this data was more related to separate news that consumer confidence fell sharply in April, suggesting trouble ahead for Retail Sales figures. A rise in energy bills, increases in taxation, more pessimism about the economy and repeated warnings about the impact of US tariffs, saw confidence hit its lowest since November 2023.
Will interest rate cuts and a fall in energy costs later in the year see consumer confidence rebound though? These are both hypothetical for now, but the IMF figures suggest that the Bank of England should be cutting interest rates a further three times this year. Watch this space.
Bank of England Governor Andrew Bailey was also in Washington for the IMF events. He spoke in a CNBC interview, reassuring markets that he didn’t believe the UK was close to recession. Bailey reaffirmed that the most recent GDP data was quite encouraging, and that the Bank are focussed on any pending growth shocks from tariffs. Elsewhere, his colleague Clare Lombardelli stated that the Bank must assume economic shocks such as trade tensions will persist ongoing.
Overall, a very mixed week for UK data, including the Manufacturing and Services PMI releases. These both took a further drop under the 50 levels which indicates contraction.
The IMF also dropped growth forecasts for major European nations last week. Major players such as Italy and France saw a downward revision, whilst Germany saw a cut to a 0.0% growth prediction this year. Overall, the Eurozone is now expected to grow by just 0.8% this year, down from 1.0%. There is a suggestion though of an uptick to 1.2% next year in the bloc, assisted by the recent government spending changes in Germany.
The only advanced economy to see an upgrade was the Spanish figure. The country is now predicted to grow by 2.5% in 2025, which encapsulates a resilient economy and considerable reconstruction after the devastating floods of six months ago.
Like everyone else it seems, Christine Lagarde had a ticket to the IMF meetings and a slot for a CNBC interview too. In this, she confirmed that the ECB will cut or pause in their next meeting but will remain “data dependent to the extreme”.
Whilst on US soil, Lagarde jabbed back at Trump suggesting that Europe hadn’t been unfair to the US historically on tariffs, and that the impact of his recent measures would certainly be detrimental for growth.
Eurozone PMIs meanwhile were a mixed bag. All were sub-50 indicating pessimism, with Manufacturing outperforming expectations slightly and Services numbers coming in under.
Movements on GBP-EUR last week can be seen in the chart below:
The week ahead:
Monday – Canada Federal Election
Tuesday – Spanish Flash CPI (08:00 UK time), BoE Ramsden speech (10:40), JOLTS Job Openings (15:00), US Consumer Confidence (15:00)
Wednesday – German CPI inflation (07:00), BoE Lombardelli speech (12:00), ADP Non-Farm Employment Change (13:15), US Advance GDP (13:30), US Core PCE inflation (15:00)
Thursday – Bank of Japan rate announcement (03:00), UK Mortgage Approvals (07:00), European Bank Holiday, US ISM Manufacturing (15:00)
Friday – Eurozone CPI Flash Estimate (10:00), US Non-Farm Payrolls (13:30)
Saturday – Australian Parliamentary Elections
BRIEF REMINDER – A note to clients that next Monday 5th May is a UK bank holiday, thus the Aston offices will be closed for the day, reopening as usual on Tuesday 6th May.
This week kicks off with a crucial election in Canada, as the country chooses who will lead the battle versus Donald Trump. Poll trackers suggest that former Bank of England and Bank of Canada Governor, Mark Carney, is currently in front. The Liberal Party leader has sparked a turnaround for the incumbents, following the resignation of Justin Trudeau earlier in the year.
If elected, Carney will need to use all of his economic nous in the ongoing tariff battle versus Trump. The US President seems to be backtracking on some policies of late, so Canadians will be hoping their new Prime Minister can keep the pressure up in order for their country to fight back.
We also have an important election in Australia this coming weekend, as the country goes to the polls on Saturday 3rd May. The Labor vs Coalition battle there will also see Trump featuring heavily in the minds of voters.
As with the previous, this week sees a couple of speeches from Bank of England committee members. With the next interest rate decision just a week away, we can expect to see some hints from Dave Ramsden and Clare Lombardelli as to which way they will be leaning. European news meanwhile is slim, with bank holidays in various corners of Europe on Thursday to interrupt matters further.
The main events of the week will remain from the US, with jobs data back in the spotlight. The figures are based on performance from April, but the question will be whether the tariff battles throughout the month has caused employers to hold back on their hiring. Early forecasts show 129,000 new jobs added, which would be almost half the March figure.
Any form of drop in the payrolls figure would cause US stocks and the Dollar to be sold off, amidst further fears of the trade war kicking off a US recession. The Federal Reserve will be watching closely amidst their own rate announcement next Wednesday, 7th May.
Despite a slightly calmer few days behind us, trade wars remain a concern, with growth and recessionary fears a likely outcome. Currency markets remain unpredictable and volatile as a result, meaning weekly currency fluctuations of a couple of per cent as the norm. Aston has measures to protect you from such volatility in your budgeting, so please make sure to reach out to the team for further information.
Have a great week.
