April 14, 2025 – Written by Tim Boyer
STORY LINK Tariff Panic Subsides, Pound Gains vs Euro, Dollar on Foreign Exchange Markets
There are increased hopes on Monday that immediate panic in US markets has subsided.
There has been a recovery in bonds, equities and the dollar, a notable reversal from the sharp losses recorded last week. The dollar, however, edged lower again towards the European close.
The S&P 500 index is around 1.0% higher on the day while the 10-year yield has retreated to near 4.40% with hopes that selling related to margin calls seen last week has subsided.
The firmer tone in risk appetite has underpinned the Pound with the Pound to Dollar (GBP/USD) exchange rate around 1.3180 from 1.3200 highs and close to a 6-month peak around 1.3220.
Scotiabank commented; “The signals are bullish but hint to caution as we note the negative divergence in momentum, with the RSI failing to confirm the latest gains in spot. We look to near-term resistance at 1.32 and look to support around 1.3050.”
The Pound to Euro (GBP/EUR) exchange rate has secured a strong recovery to just above 1.1600 from 16-month lows below 1.1450 last week.
Uncertainty will inevitably remain extremely high but, if US Treasuries stabilise, there is a greater chance that markets will adopt a slightly longer-term perspective and assess the US economic outlook as well as Fed policy.
Late on Friday, President Trump stated that key electronics imports from China such as laptops and phones would be excluded from the 145% tariffs on Chinese imports.
On Monday, there were comments that tariffs would not be removed, but there would be specific levels for these categories.
Trump also stated that there would be tariffs on semiconductor imports.
At this stage, there is a 10% baseline tariff for imports into the US while the tariff on cars is 25%. Most reciprocal tariffs have been delayed by 90 days while Chinese imports, excluding some electronic items, are subject to 145%.
Monex Europe head of macro research Nick Rees still expects the dollar will be vulnerable; “Markets right now are trading the uncertainty, and that has not been helped over the weekend by the contradictory stories coming out of the US administration.”
He added; “That really skews risks for the time being towards further dollar weakness as markets try to avoid some of this uncertainty by hiding basically anywhere that isn’t in the US.”
Commerzbank’s FX analyst Thu Lan Nguyen commented; “The US Secretary of Commerce pointed out that the exemption is only temporary and that the products will soon be subject to sectoral tariffs. However, it can be assumed that these will be lower than initially planned, especially for the most important supplier, China.”
According to Nguyen; “There is a growing suspicion that Trump is not only giving in to pressure from the markets, but also from individual voices of affected US companies. They seem to have made it clear to him that ‘Made in the USA’ is not as simple as the tariff enthusiasts had imagined.”
She added; “If US economic momentum slows significantly over the next three months, there is a chance that he will distance himself further from the tough tariff policy. This is initially good news for the US dollar, even if the market does not really believe it at the moment.”
Scotiabank was still cautious; “The latest tariff pause may not last long. President Trump indicated that sector-specific tariffs are still coming for electronics and chips. No-one is “off the hook” he commented at the weekend.”
Global central banks will be monitoring the situation closely.
There has been only a slight change in Federal Reserve expectations with the chances of a rate cut by mid-year edging slightly lower to near 70%.
According to MUFG; “The latest climbdown by Trump related to electronics, Apple phones and semiconductor chips may be a sign of further watering down of tariff measures ahead but central banks will likely emphasise caution and the potential for abrupt shifts in the monetary stance or guidance based on policy developments and inflation data and expectations.”
The latest US business confidence data releases will be watched closely this week. The April New York Empire manufacturing index will be released on Tuesday with the Philadelphia Fed survey on Thursday.
There will be relief if there is evidence of resilience in demand, but sharp declines across a broad range of indicators would increase fears over the outlook.
Higher prices components would also increase stagflation fears.
The PMI business confidence readings next week will also be crucial for market sentiment.
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