After the US Supreme Court overturned previous tariffs, President Trump imposed a blanket 15% levy on all imports to the US.
Tariffs increase costs for businesses and consumers and create uncertainty. The fallout from the latest levy may drive exchange rate volatility over the next few weeks.
The outlook for economies and currencies has again been affected by President Trump’s tariff policies. The Supreme Court ruled against the broad emergency tariffs Washington imposed last year, and less than 24 hours later, Trump imposed a blanket 15% tariff on imports into the US from all countries, using a different legal mechanism.
The move may store up problems for later, as the new tariffs are open to legal challenge and will require congressional approval after 150 days. The immediate impact on money markets was a rally of the euro, which had been weakening against the dollar for much of last week. The EU currency gained ground and remains up over 12.5% in the last 12 months.
Sterling also regained some value after the Supreme Court decision. Nevertheless, the pound remained down against the dollar over the week as a whole, after investors dialled down expectations of an imminent rate cut in the US.
European economies rebound
Despite edging downwards against the dollar, the pound was supported by stronger-than-expected UK economic data. Activity in the UK private sector expanded at its fastest pace since spring 2024. Retail sales and public sector borrowing data were both positive. Figures released last week also showed manufacturing in the eurozone expanding more quickly than forecast. By contrast, US GDP growth came in at 1.4%, well below forecasts.
The week ahead:
US microchip maker Nvidia will release its fourth-quarter results this week (Wednesday), marking an important moment for the global economy. As Nvidia produces most of the chips driving the AI revolution, its results will provide insight into the state of the AI industry: is it maintaining momentum, or slowing down? With so much global investment in the AI sector, a surprise on either the upside or downside could move money markets.
Elsewhere, important releases include EU inflation data (Wednesday) and UK consumer confidence (Friday).
