Pound rallies as UK 'spared' with 10% tariff.
Pound Sterling is showing heightened volatility following U.S. President Donald Trump's announcement that UK imports would receive a 10% tariff.
The UK's 10% is far more lenient than what other nations are facing, which sends the Pound powering higher.
A look at some of the more relevant tariffs are:
20% on the EU
34% on CHINA
46% on VIETNAM
24% on JAPAN
The Pound is rising against most majors, confirming its function as a 'safe-haven' in the tariff trade.
The Pound-to-Dollar exchange rate is higher at 1.3008, confirming the Dollar is an all-out loser. Understandable; ultimately, U.S. consumers and businesses shoulder the higher import costs.
The Pound-to-Euro exchange rate is up at 1.1989, a gain which suggests the 20% EU tariff is on the harsher end of expectations.
Elsewhere, China-linked currencies like the Australian Dollar and New Zealand Dollar are selling off.
"They charge us, we charge them. How can anybody be upset?" Trump asked an audience assembled in the White House's Rose Garden.
Among others, he singles out China and the European Union. "They rip us off. It's so sad to see. It's so pathetic."
"India," he says, "very tough. Very, very tough."
Regarding FX reactions, we have been reporting that the GBP entered the tariff announcements as something of a hedge owing to its relatively low exposure.
This is due to the UK's depleted manufacturing base, which leaves it holding a balanced trade in goods with the U.S.
"There are a number of scenarios for the impact on the UK, but our sense is that the UK escapes the worst excesses of tariffs due largely to a relatively benign trade position with the US. That should be GBP supportive," says Kamal Sharma, FX Strategist at Bank of America.
"While no outright bullish GBP theme has emerged, we have noticed clients using GBP as a numerator more and more. EURGBP puts, GBPAUD calls, and GBPCAD calls have all been going through," says a new note from Spectra Markets.