The relentless market volatility of recent weeks may have led some to expect a calmer period ahead. However, with a Bank of England interest rate decision and major employment data releases from the U.S., such stability seemed unlikely—especially with President Trump at the helm.
The first major market move came swiftly, as Trump announced over the weekend his intention to impose a 25% tariff on imports from both Mexico and Canada, while also implementing a 10% tariff on Chinese exports to the U.S. This announcement led to a sharp strengthening of the U.S. dollar against both the euro and the pound. However, as Mexico, Canada, and China responded with threats of retaliatory measures, the rally proved short-lived. By Tuesday’s market opening, levels had largely returned to those seen over the weekend. Additionally, Trump’s statement that the European Union was next in line for tariffs caused a notable decline in the euro against the dollar.
On Tuesday, the primary focus was the latest JOLTS job openings report from the U.S. Forecasts anticipated a decline from the previous figure of 8.16 million to 8.01 million, but the actual results were significantly weaker, coming in at 7.60 million. This disappointing reading triggered a sharp rally in the pound against the dollar, with GBP/USD (Cable) experiencing a swing of approximately 2.5% from Monday to Tuesday.
Further pressure on the dollar came on Wednesday with the release of ISM Services PMI data. Although the index remained comfortably above the key 50-mark threshold, forecasts had projected a reading of 54.2, while the actual figure came in lower at 52.8. However, it was not all negative news for the U.S., as the ADP Non-Farm Employment Change report exceeded expectations. Forecasts had anticipated a drop to 148,000, but the final figures came in stronger at 183,000, providing some support for the dollar.
Thursday was dominated by the Bank of England’s latest interest rate decision. A 25-basis-point (bp) cut was widely expected, with markets anticipating an 0-8-1 voting split. However, the actual vote came in at 0-9-0, confirming the cut but resulting in limited volatility at the time of release. The key market-moving development came later, as the Bank of England downgraded its growth outlook for the UK and warned of rising inflationary pressures. This led to a decline in the pound against both the U.S. dollar and the euro.
