Official White House Photo by Daniel Torok.
The Dollar softens after tariffs are reinstated.
The Pound-to-Dollar conversion recovered after U.S. President got his tariffs back and then tried to encourage the Federal Reserve to cut interest rates.
The Court of Appeals for the Federal Circuit granted an emergency motion from the Trump administration that reinstated his "Liberation Day" tariffs. Trump's team successfully argued the tariffs were "critical for the country's national security".
The far-reaching tariffs announced by Trump on April 02 had been blocked a day earlier by the U.S. Court of International Trade, which had ruled that Trump exceeded his authority under the International Emergency Economic Powers Act by imposing sweeping tariffs without congressional approval.
So, after just one day of relief, tariffs are back in force, and FX markets are giving back the small relief premium that followed the cancellation of tariffs.
"There was a brief glimmer of hope that U.S. courts might overturn the US government's tariff policy. The resulting recovery of the US dollar was short-lived. After an appeals court blocked a corresponding injunction, the dollar took a significant hit," says Ulrich Leuchtmann, Head of FX and Commodity Research at Commerzbank.
The Pound to Dollar exchange rate was set to record a third daily decline, having fallen as low as 1.3414, before recovering to close the day in the green at 1.3486.
Also weighing on the Dollar were comments from U.S. Treasury Secretary Scott Bessent that trade talks with China are "a bit stalled" and may require a call between President Donald Trump and President Xi Jinping to reach a deal.
"I think that given the magnitude of the talks, given the complexity, that this is going to require both leaders to weigh in with each other," Bessent said.
Above: GBP/USD at daily intervals.
Trump, meanwhile, renewed pressure on the Federal Reserve to lower interest rates during a scheduled meeting with Chair Jerome Powell at which they discussed "economic developments including for growth, employment, and inflation."
"The meeting between the U.S. president and Fed Chair Jay Powell went as expected. The president told the Fed Chair that he would be making a mistake by not lowering the key interest rate immediately. That would be an "economic disadvantage" compared to China and other countries. We have heard similar statements from him before," says Leuchtmann.
Foreign exchange markets were sanguine, as the Federal Reserve has thus far proven unwilling to yield to verbal pressures from the White House.
A statement issued by the Fed following the meeting confirmed that the matter of future movements in interest rates was not discussed.
"The statement issued by the Fed following the meeting was encouraging," says Leuchtmann. "That is how it should be for an independent central bank!"
However, the steady pressure being applied by the White House on the Fed to lower interest rates will have an impact, at least at the margins. It could be the case that Fed board members who might have been erring on a preference to keep interest rates unchanged might opt to pull the trigger.
This means that Trump could ultimately succeed in nudging rate cuts forward, which would tend to weigh on the Dollar.