The British pound plummeted against the U.S. dollar on Monday, hitting a one-month low. Investors fled to safe-haven assets amid growing fears of a global recession. The sharp decline in the pound was triggered by news that the White House had proposed new tariffs.
This sparked fears of an economic downturn. Investors are increasingly expecting a rate cut from the Bank of England in May. Recession fears coupled with hopes that the White House might reconsider their stance on trade policies led to this volatile market reaction.
Risk aversion boosted the U.S. dollar, as traders reacted to mixed messages about a potential 90-day pause in tariffs for all nations except China.
Pound falls amid economic uncertainty
This speculation was briefly fueled by a CNBC report, but was quickly quashed by a statement from President Trump.
He clarified that no such pause was being considered, deeming the report “fake news.”
The uncertainty caused by these mixed signals has kept traders on edge. Despite the pessimism, safe-haven currencies have seen gains, and equities have started to recover. In the UK, there is little economic data to steer traders differently.
This has led to increased speculation about an imminent interest rate cut by the Bank of England. The trade tensions between the world’s two largest economies have raised alarm bells over the potential for prolonged economic instability. These economic concerns have driven market participants to dump riskier assets, including the pound, in favor of traditionally safer bets such as the U.S. dollar, yen, and gold.
