The United States has been very unapologetic about its trade-directed policies. Importantly, this stance continues to hold, even when faced with ongoing legal challenges of the International Emergency Economic Powers Act (IEEPA) tariffs. Investors are still confronted with choppy seas. Projections show that high effective tariff rates will persist through 2025, cementing the permanence of US tariffs in the global marketplace. These tariffs react to multi-layered geopolitical tensions, notably the Middle East. As such, traders are facing an unprecedented level of risk aversion.
The new geopolitical environment has all but raised the temperature, particularly with Iran promising reprisals for Israeli strikes this month. This surprising move has sent a choppy wave of optimism through investors, who are anxiously awaiting the Iranian government’s response. Compounding these uncertainties, market participants are looking toward next week’s US sentiment data, which could further complicate trading strategy.
Naturally, with all of these events unfolding the GBP/USD currency pair has been extremely volatile. A broader risk-off sentiment has pushed the pair under the 1.3550 level. Such a movement is part of a larger trend of a weakening Pound Sterling against the US Dollar. Currency traders were interested on Friday morning with the GBP/USD pair trading around 1.3530 even before the European market opened. Overall, this trend is bad news for the value of the British pound.
The Euro has been no better off, similarly seeing the EUR/USD pair take a loss. It stays around 1.1550 despite a risk-averse market’s song background. This decline follows a trend of a Euro landing at multi-year highs, demonstrating the precariousness and highly volatile nature of today’s economic landscape.
Those kinds of trade deals with the US are described by other nations as “largely symbolic.” What this indicates is that even when negotiations happen, it’s difficult to drive meaningful change. These current tariffs are a symptom of a much larger plan that is based on more than just economic interests, but geopolitical interests.
As the circumstances develop, market participants will be watching closely. It’s the delicate dance between geopolitical developments and economic fundamentals that will probably keep driving trading activities in either direction over next weeks. And investors are hypersensitive to the fact that any change in sentiment could precipitate a panicked market move.