Asset Summary – Thursday, 3 April
GBPUSD faces downward pressure as recent economic data and government forecasts paint a less optimistic picture for the UK economy. Lower-than-expected inflation, though aligned with Bank of England forecasts, suggests a potential delay in interest rate hikes, diminishing the pound’s appeal. Further weighing on the currency are revised growth forecasts indicating a weaker economic outlook for 2025 coupled with increased borrowing for 2025-26 as this indicates continued fiscal strain. The government’s announced policy changes to restore the budget, while aimed at long-term stability, introduce uncertainty and could further dampen investor sentiment toward the pound in the short term.
EURUSD is exhibiting upward pressure due to several factors. Despite tariffs imposed by the U.S., the euro has strengthened against the dollar. This is partly because the tariffs themselves have weakened the dollar, as they intensify global trade conflict and raise concerns about economic expansion. Concurrently, cooling Eurozone inflation data, with headline and core inflation rates decreasing, suggest the European Central Bank might implement significant interest rate cuts. Increased anticipation of these cuts, amounting to a potential 65bps reduction, further fuels the euro’s relative strength against the dollar.
DOW JONES is expected to experience significant downward pressure following the announcement of new tariffs. The anticipation of a global trade war, triggered by increased levies on goods from China, the EU, Vietnam, and Cambodia, has sparked investor concern. This is reflected in the sharp decline of Dow futures and the poor performance of companies heavily reliant on imports or with extensive global supply chains, indicating a likely drop in the index’s value as markets open.
FTSE 100 experienced a decline, closing lower as market participants reacted to potential trade uncertainties stemming from anticipated tariff announcements. The overall negative sentiment, reflected in losses across European markets, weighed on the index. Specific sectors, particularly those represented by Rolls-Royce, Vodafone, GSK, and housebuilders Persimmon and Taylor Wimpey, contributed significantly to the downward pressure. Conversely, positive analyst sentiment towards Bunzl and gains in WPP provided some offsetting support. Merger and acquisition activity within the FTSE 250, exemplified by Bakkavor Group’s jump, highlights specific company-level events impacting the broader market landscape.
GOLD’s price has surged to a record peak amidst heightened risk aversion, primarily fueled by President Trump’s newly announced tariff policies impacting major economies. The prospect of widespread tariffs has created economic uncertainty, driving investors towards safe-haven assets like gold. Further bolstering its value are expectations of impending interest rate cuts by central banks, consistent purchasing activity by central banks themselves, and robust demand for gold-backed exchange-traded funds, particularly in China. Recent weak economic data from the U.S., including disappointing jobs and manufacturing figures, have further intensified speculation about potential policy easing by the Federal Reserve, adding to the bullish sentiment surrounding gold. The upcoming nonfarm payrolls data will be closely watched for further clues about the Fed’s future actions.