Volatility continues amid talk of US trade deals, retaliation and fighting until the end

Good morning

Another day, another equity market rout.  At one stage yesterday a headline suggested that Trump was considering a 90 day suspension of tariffs which got the markets turning into positive territory, only for such talk to be dismissed by the White House and we were back to where we started, basically much lower than the Friday close.  By the NY close US equities were off their lows and the Nasdaq was actually in positive territory, albeit by just 0.1%.  Asian equities had a great day, Nikkei was up over 6% and European markets are opening higher.

GBP was hit particularly hard yesterday, GBPUSD traded to a low of 1.2710, around 500 pips of the Thursday high. GBP lost ground against EUR as well, the pair trading to mid-1.16s for the first time since Aug 2024 and perhaps more relevant over 350 pips off last weeks highs.  A dramatic turn, EUR strength coming despite US and EU clearly not being on the same page.  EU have talked of zero tariffs on certain goods and vehicles if US reciprocate, but EU are also planning retaliatory tariffs which is to be voted on this week.  Meanwhile I see a US Admiral has been fired from NATO, that won’t please Trump.

Markets were spooked again in the afternoon as Trump threatened China with 50% tariffs unless they dropped the retaliatory tariff of their own.  Trouble is, I can’t see them bowing down to Trump’s demands.   Chinese stocks were up overnight despite China accusing US of blackmail, bullying and confirming they will fight to the end. 

With the comeback in stocks, currency prices have normalised to some extent.  GBPUSD is currently 1.2775, EURUSD 1.0960, so GBPEUR still mid 1.16’s.  AUD and NZD fare better with the improved risk sentiment, trading at 2.1050 and 2.2750 against GBP, while USDJPY is up at 147.00 from yesterdays morning lows around 144.85.  I’m not sure if the news that US will possibly meet Iran for direct talks is helping the risk environment but that has to be a good thing. 

I must be honest that I didn’t see this coming although in hindsight I have to wonder how we missed it.  That’s not the point.  The point is that when we speak to clients, or specifically new or potential clients, we make it clear we rarely make calls as to which way the market is going, instead we create positions structures and programs that offer good currency purchase/sale levels, while having protection against excessive market movements.

The latter factor is important for many reasons.  It limits the mark to market losses on positions, which in turn eases strains on balance sheets.  It also offers the potential for purchase/sale levels to improve should we see significant market movement.  Do we claim we will beat the markets?  No.  Do we offer ideas that are designed to outperform spot?  No.  But do we offer programs that give clients the peace of mind in knowing their currency requirements are fulfilled without the headaches that come with undue risks?  Yes, absolutely. 

In summary, at some point you may need to trust someone who talks about FX.  We know the FX market doesn’t exactly engender trust, we know that by people still putting down the phone at the first sound of the words ‘currency’ or ‘foreign exchange’.  But most of you rely on pension advisers, auditors, lawyers, accountants, health and safety officials.  We can only ask you to think of adding RAM to that list of trusted specialists.  Mark and I, having worked together in FX for the past 35 years or so and now co-owners of our own business, will look at your requirements with an independent and expert head and offer help, advice or just general thoughts as appropriate.

Anyway, that’s enough of that for now, but I hope I managed to get the point across.  But what else has been going on?  Well Premier League action last night saw Newcastle move into fifth place by beating Leicester.  This evening sees Arsenal host the mighty Real Madrid in the first leg of the Champions League quarter finals, while Harry Kane’s Bayern Munich take on Inter Milan.  Should be a couple of cracking matches I hope.

I’m watching the Birmingham bin issues for a while now, at first I presumed it would all die down quickly but it has now been five weeks since the refuse workers went on strike amid pay rise disputes.  I don’t know the ins and outs, it does seem Birmingham Council are looking to cut pay for some workers, from what I hear perhaps higher paid workers whose roles are not entirely necessary.  That may be unfair, that’s just my take on it.

Anyway, with some 20,000 tonnes of rubbish lying in the streets, something needs to be done.  We do all moan at councils, mostly for good reason, but a few weeks of no rubbish collection clearly shows how vital some of the services they offer really are.   Rats the size of kittens are reportedly running around, they are known to multiply very quickly so they’re going to have a very big problem soon if rubbish remains in the streets.  Surely someone with a big tipper lorry and a grabber could offer their services to clear the streets.  Nothing like getting workers back to work than seeing someone else do your job.  

RBNZ are likely to cut rates by 25bps to 3.5% overnight, RBI are also expected to but by a similar amount to bring their rates to 6%.  Both should be pretty well priced in.

Crikey, a lot of words today, still with a limited calendar you’ll have plenty of time to read it all.  Still, well done if you got this far. Don’t be taken in by the brief improvement in risk sentiment.  We all want to see calm restored but I think it’s too early to be too hopeful that we’ve seen the end of the mayhem.

Have a great day…

-  10.00 ECBs de Guindos speaks

-  15.00 CAD Ivey PMI

-  15.00 ECBs Cipollone speaks

-  17.00 BoEs Lombardelli speaks

-  19.00 Feds Daly speaks

-  03.00 RBNZ rate announcement

-  05.30 RBI rate announcement