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Pound hits four-month high as dollar tumbles under Trump - THE TELEGRAPH
BY Chris Price
The pound rose to a four-month high against the dollar as Donald Trump’s tariff war raised fears that the US faces a recession.
Sterling climbed 0.1pc on Tuesday to tip above $1.30 for the first time since November as the US president’s trade policy undermined confidence in the world’s largest economy.
Scott Bessent, the US treasury secretary, warned at the weekend there would be “no guarantees” that America would avoid a recession, although on Tuesday he insisted the underlying US economy remains “healthy”.
Mr Trump pledged on Monday that there would be no exemptions to his metal tariffs and reaffirmed his commitment to global reciprocal tariffs from April 2.
The uncertainty is likely to lead both the Bank of England and the US Federal Reserve to keep interest rates on hold at their meetings later this week.
Analysts suggested the pound has also been boosted by expectations that the UK will avoid the worst of Mr Trump’s tariff war.
Jane Foley, an analyst at Rabobank, said: “US data suggest that it runs a modest trade surplus with the UK, though UK data suggest the opposite.
“Trump’s steel and aluminium tariffs are unlikely to have much of an impact on the UK economy and Sir Keir Starmer is maintaining a pragmatic approach to tariffs, potentially keeping his powder dry in case exemptions need to be negotiated in the future.”
Wall Street sell-off
It came as investors launched their biggest sell-off of US stocks on record amid growing concerns about Mr Trump’s tariffs, Bank of America’s most recent fund manager survey shows.
Investors instead piled into European and British stocks as they sought to shield themselves from the prospect of a US recession.
Harald Berlinicke, a partner at Sarnia Asset Management, said the turnaround reflected “investors’ increasing frustration with Trump tariff drama.”
He added that UK stocks had benefited from a drop in the value of the US dollar and increase in the value of sterling.
The pile into European stocks saw money managers’ investments in eurozone companies hit their highest levels since July 2021, Bank of America’s survey showed.
American stocks that gained most during the recent bull run have now emerged as the biggest losers from the recent market correction that has seen the S&P 500 index lose drop by more than 7pc over the past month.
Technology stocks, which have seen their share prices surge over the past two years, have suffered the sharpest declines in what Bank of America dubbed a “bull crash”.
Nvidia, the microchip maker, has fallen 14pc over the past month, while Palantir Technologies, the software company started by the tech billionaire Peter Thiel, sank 30pc over the same period of time.
Bank of America’s survey showed investors are now losing confidence in the American economy more broadly, with optimism among fund managers at its lowest levels since November 2023.
Bruno Schneller, managing partner at Erlen Capital Management, said fears over “stagflation” and mounting “trade war tensions” had worked to undermine notions of “American exceptionalism” that helped drive the recent surge.
