Closing post
Time to recap…
The International Monetary Fund has warned that Donald Trump’s tariffs have unleashed a “major negative shock” into the world economy, and cut its forecasts for US, UK and global growth.
The Washington-based lender has cut its forecast for global GDP growth to 2.8% for this year – 0.5% weaker than it was expecting as recently as January.
Its forecasts show every major economy being hit, with the UK expected to grow by 1.1% this year, down from 1.6% predicted in January. The IMF expects a sharper deterioration for the US, from 2.7% to 1.8%.
In its latest World Economic Outlook, the IMF says:
“We expect that the sharp increase on 2 April in both tariffs and uncertainty will lead to a significant slowdown in global growth in the near term.”
At a press conference in Washington DC, the IMF also explained that the UK’s downgrade was due to domestic factors – including weak growth at the end of 2024 – more than due to Trump’s trade war.
The Fund has also raised the chances of a US recession in the next year to almost 40%.
The IMF is also concerned that the global financial system is coming under increasing strain as Donald Trump’s trade war rocks markets.
“Global financial stability risks have increased significantly,” the IMF said in its regular snapshot of the system, urging regulators to be on the alert for potential crises.
It pointed to the “sharp repricing of risk assets”, that has followed the US president’s tariff announcements since February – in particular his 2 April “liberation day” statement – and warned that there may be more to come.
The Fund’s latest forecasts were released hours after the US dollar fell to a three-year low against a basket of currencies, hit by anxiety after president Trump renewed his attacks on Fed chair Jerome Powell.
Amid nervous early trading, gold hit a new record high of $3,500 per ounce.
But Wall Street has shaken off some of yesterday’s losses, with the S&P 500 index now up 2.2%, as markets rise in Europe.
FTSE 100 closes at highest since early April
Back in London, the stock market has ended the day at its highest closing levels since 3 April.
The FTSE 100 share index has closed 53 points higher at 8,328 points, up 0.65% today.
European markets also had a positive day, with Germany’s DAX up 0.3% and France’s CAC gaining 0.5%.
UK chancellor Rachel Reeves has found a silver lining in the IMF’s downgraded growth forecasts, saying:
“This forecast shows that the UK is still the fastest growing European G7 country. The IMF have recognised that this government is delivering reform which will drive up long-term growth in the UK, through our Plan for Change.
“The report also clearly shows that the world has changed, which is why I will be in Washington this week defending British interests and making the case for free and fair trade.”
The Fund’s new forecasts show that the UK is expected to be the third-fastest growing G7 member, with 1.1% growth, behind the US with 1.8% and Canada with 1.4%.
That would put the UK ahead of Japan and France, where 0.6% growth is expected, as well as Italy (0.4%) and Germany (where stagnation is forecast).
We also have fresh confirmation that Donald Trump’s trade wars have hurt European consumer confidence.
The latest gauge of consumer sentiment across the EU has dropped this month, to -16.7 in April from -14.5 in March
ING say this “bad” reading jeopardising hopes for a consumption-led recovery in 2025.
Peter Vanden Houte, ING’s eurozone economists, explains:
While there is not a one-on-one correlation between consumer confidence and household consumption (with the former being more volatile), this doesn’t bode well for consumption growth. Isn’t the economy all about animal spirits, after all?
IMF urges countries to "work constructively" on debt restructuring
The IMF is urging countries across the world to “work constructively” together.
They should “promote a stable and predictable trade environment, facilitate debt restructuring, and address shared challenges”, it argues.
Tim Jones, Policy Director at Debt Justice, said there is an “urgent” need to cut the debts of the poorest countries in the world.
“Around half of lower-income countries are making debt payments at a level that seriously constrains public spending. The biggest problem is high-interest loans owed to banks, hedge funds and oil traders.
We urgently need debt cancellation to reduce debts to a sustainable level, so that countries can afford essential spending on healthcare, education and responding to the climate emergency.”
IMF warns financial stability risks are rising
You wait ages for an important IMF report, and then two come along within an hour or so.
The Fund has just issued its latest Global Financial Stability Report, which warns that global financial stability risks have increased significantly since last autumn.
The report blames heightened economic uncertainty around trade policy, and tighter global financial conditions, which together are driving up financial risks worldwide.
The Fund warns that there is a small risk of a severs slump in growth, saying":
According to the IMF’s Growth-at-Risk (GaR) model, in the year ahead and with a 5 percent chance, global growth could fall below 0.4 percent, highlighting an elevated level of financial stability risk.
This figure is nearly a full percentage point worse than the October 2024 assessment.
The Fund also flags three vulnerabilities that could weigh on financial stability going forward.
Despite the recent turmoil in markets, valuations remain high in some key equity and corporate bond segments.
Some financial institutions could come under strain in volatile markets, especially highly leveraged ones – such as hedge funds. If they are forced to leverage it could exacerbate market turmoil.
Further turbulence could descend upon sovereign bond markets, especially in jurisdictions where government debt levels are high.
IMF: Central bank independence must be preserved
Q: How destabilising are Donald Trump’s attacks on the US Federal Reserve?
IMF chief economist Pierre-Olivier Gourinchas replies that “central banks are facing a delicatae moment”, before emphasising the importance of central bank independence.
He tells journalists at the Fund’s press conference that in many countries, tariffs will increase recessionary forces and lower price pressures, making it easier for central bankers to cut interst rates.
But in the US, tariffs will increase price pressures. That’s why the Fund expects US inflation will remain at 3% this year, as in 2024.
Gourinchas then reminds us that we recently suffered a period of very elevated inflation.
It is “critical” to ensure that inflation expectations remain anchored, and for people to believe that central banks will use their instruments to bring inflation back to target, he says.
And one “critical aspect” of what central banks do comes from their credibility, Gourinchas insists, explaining:
Central banks need to remain credible, and part of that credibility is build upon their central bank independence.
From that perspective it’s very important to preserve that.
Wall Street jumps 1.5% in early trading
Over in New York, the stock market has opened higher, recovering some of yesterday’s sell-off.
The Dow Jones Industrial Average, which tracks 30 large US companies, has gained 1.5% in early trading, up 577 points at 38,747 points.
The broader S&P 500 is also 1.5% higher, up 77 points to 5,236 points.
The IMF are then challenged about why their forecast for China’s growth this year is weaker than recent official statistics.
[the Fund has cut its forecast for China’s GDP growth this year to 4%, down 0.6 percentage points].
IMF chief economist Pierre-Olivier Gourinchas explains that the forecast does not include the latest Chinese GDP data, which showed 5.4% annualised growth in Q1.
The downgrade reflects the fact that China is facing the “most elevated” tariffs from the US, Gourinchas says. On their own, tariffs would knock 1.3 percentage points off China’s growth rate this year.
But this is counter-balanced by other factors, including fiscal stimulus from Beijing to support its economy.
IMF: Domestic factors also weighing on UK growth
The IMF then takes a flurry of questions about the UK economy, and today’s downgrade of the UK’s growth forecast (to 1.1% this year, down from the 1.6% previously expected).
Q: What is weighing more on the UK economy – tariff barriers, or domestic challenges such as cost of living pressures?
Pierre-Olivier Gourinchas says tariffs, and uncertainty, are weighing on the UK economy, as they are for many countries.
But there are some UK-specific factors too, which are are probably the biggest reason for the 0.5 percentage point cut to this year’s growth forecast.
Gourinchas cites weaker growth at the end of last year, and some tightening of financial conditions as longer-term interest rates have risen.
Q: Why do you predict the UK will have the highest inflation rate among the G7, and will tariffs be inflationary or disinflationary?
Gourinchas points to “domestic factors”, including changes to regulated energy prices.
Tariffs will be a “negative demand shock” for the UK economy, he predicts – it will weaken activity, and also lower price pressures.
Q: Will high inflation make it harder for the Bank of England to cut interest rates?
The Fund is expecting the Bank of England to cut interest rates four times during 2025, Gourinchas says – that implies three more cuts, as well as the cut in February.
Q: Is it possible that Donald Trump is a genius, and knows something you don’t?
Gourinchas doesn’t give an opinion on Trump’s mental prowess.
But… he insists that in the medium and long term, the IMF believes tariffs will have a negative impact for all regions.
Q: What does the IMF think will happen to trade flows this year?
IMF chief economist Pierre-Olivier Gourinchas says the Fund sees a “large impact on global trade coming from the tariffs”.
Q: To what extent will the downward pressure on the US dollar help emerging markets who have dollar-denominated debt?
The IMF’s Pierre-Olivier Gourinchas says there has been a “fairly broad-based” weakening in the US dollar in the last few weeks [reminder, it hit a three-year low this morning].
Some of that is coming from the weaker US growth prospects, and some is coming from increased uncertainty.
He says:
It’s leading to a reassessment of the global demand for dollar assets.
Gourinchas points out that there has been “tremendous capital inflows” into the US markets in recent years.
Markets are handling the current adjustment, he adds, and the Fund does not see signs of stress in currency markets.
But what does it mean for emerging markets?
Gourinchas agrees that a stronger dollar has put pressure on developing markets in the past, so that’s not a threat at the moment.
But the flipside is that developing markets’ exports are losing some competitiveness because their currencies are rising against the dollar.
Updated
Here are the IMF’s new forecasts for this year:
IMF Growth Projections: 2025
— IMF (@IMFNews) April 22, 2025
🇺🇸US: 1.8%
🇩🇪 Germany: 0.0%
🇫🇷France: 0.6%
🇮🇹Italy: 0.4%
🇪🇸Spain: 2.5%
🇬🇧UK: 1.1%
🇯🇵Japan: 0.6%
🇨🇦Canada: 1.4%
🇨🇳China: 4.0%
🇮🇳India: 6.2%
🇷🇺Russia: 1.5%
🇲🇽Mexico: -0.3%
🇸🇦KSA: 3.0%
🇳🇬 Nigeria: 3.0%
🇿🇦RSA: 1.0% pic.twitter.com/LzX730aUw6
IMF's Gourinchas: US economy was strong, before tariffs
The IMF are now holding a press conference on their latest economic forecasts – it’s being streamed here:
The first question: What would it take for the IMF to forecast a US recession this year?
Pierre-Olivier Gourinchas, the IMF’s chief economist, says the Fund is forecasting a “significant slowdown” in the US, with growth of 1.8% expected this year (down from a previous forecast of 2.7%).
That’s not a recession, he points out.
Gourinchas explains that the US economy entered the current trade war in good shape, which is why a recession isn’t expected this year.
He says":
The reason for this is that we have a US economy that in our view is coming from a position of strength.
We had an economy that was growing very rapidly. We have a labour market that is still very robust.
But he cautions that there were some signs of “weakening and slowdown” in the US economy, even before the tariff announcements.
So, only 0.4 percentage points of the downgrade this year is due to the new tariffs, he explains.
Gourinchas also confirms that the Fund sees a greater risk of a US recession – up from 25% last October to around 40% now.
IMF says US recession now more likely
Oof! The International Monetary Fund now believes there is a greater risk of a US recession this year.
The Fund’s latest World Economic Outlook estimates that probability of a US recession occurring in 2025 is now 37%, up from 25% back in October.
It also sees a greater risk that US inflation is above 3.5% this year – this is now a 30% chance, up from 13% back in October.
Pierre-Olivier Gourinchas, the IMF’s chief economist, has told the Financial Times that the fund’s central forecast was that the US and global economies would avoid recession this year.
But, he warned:
“The major risk in front of us is that there could be further escalation in tariffs and trade tensions.
There is also the risk of financial conditions tightening much further than they have.”
The IMF is warning that “the world economy is entering a new era”….
The world economy is entering a new era, amid tariffs and rising uncertainty. Our WEO revises down global growth to 2.8% in 2025 with trade growth slowing to just 1.7%. Inflation is revised up by about 0.1 percentage point. Read @pogourinchas's blog: https://t.co/mxsh4UNpQE pic.twitter.com/j8ll2DFmSm
— IMF (@IMFNews) April 22, 2025
Without the April tariffs, global growth forecast would be fairly similar to that projected in January. Under the tariffs, global growth is projected to slow down significantly but remain above recession levels. Read @pogourinchas's blog. https://t.co/mxsh4UNpQE pic.twitter.com/Qczj65WKhT
— IMF (@IMFNews) April 22, 2025
Germany’s economy now isn’t expected to grow at all this year.
The Fund has cut its forecast for German growth this year to 0.0%.
Japan’s growth forecast has also felt the IMF’s scalpel – it’s been revised down to 0.6% this year, down from 1.1% forecast in January.
Updated
UK growth forecast cut
The IMF has cut its forecasts for UK growth too.
It now forecasts UK GDP will rise by 1.1% this year, down from 1.6% forecast in January.
Growth in 2026 has been trimmed to a forecast 1.4%, down from 1.5% predicted three months ago.
The IMF has sharply downgraded its forecast for US economic growth, having concluded that Donald Trump’s tariffs will disrupt trade.
The Funs now forecasts US GDP will rise by 1.8% this year, down from 2.7% forecast in January.
Its estimate for US growth in 2026 has been cut to 1.7%, down from 2.1%.
IMF slashes global growth forecasts due to Trump trade tensions
Newsflash: the International Monetary Fund has slashed its forecasts for global growth this year and in 2026, due to the disruption caused by Donald Trump’s trade war.
The IMF is now predicting that growth across the world economy will fall to 2.8% this year, down from 3.3% in 2024, followed by 3% growth next year. Back in January, the Fund had forecast 3.3% growth in both 2025 and 2026.
It blames the direct effects of the new trade measures and their indirect effects through trade linkage spillovers, plus heightened uncertainty, and deteriorating sentiment.
In its latest World Economic Outlook, the Fund says:
“The swift escalation of trade tensions and extremely high levels of policy uncertainty are expected to have a significant impact on global economic activity.”
Growth in advanced economies is now projected to be 1.4% in 2025, half a percentage point lower than it forecast in January.
The report also shows how Donald Trump has pushed up the US effective tariff rate to the highest in over 100 years – above the levels which compounded the Great Depression:
The IMF warns, soberly, that the outlook is dominated by “intensifying downside risks”.
Its World Economic Outlook says:
Ratcheting up a trade war, along with even more elevated trade policy uncertainty, could further reduce near- and long-term growth, while eroded policy buffers weaken resilience to future shocks.
Divergent and rapidly shifting policy stances or deteriorating sentiment could trigger additional repricing of assets beyond what took place after the announcement of sweeping US tariffs on April 2 and sharp adjustments in foreign exchange rates and capital flows, especially for economies already facing debt distress.
Broader financial instability may ensue, including damage to the international monetary system.
Updated
Dario Perkins, economist at City firm TS Lombard, makes an excellent point – if Jerome Powell is forced out by Donald Trump, who would want to slide into the Fed chair’s shoes?
Seriously, given the overt pressure coming from this administration, who would want to be the next Fed chair anyway? In these circumstances, you have to be pretty suspicious of WHOEVER takes on the job next year...
— Dario Perkins (@darioperkins) April 22, 2025
Good point. Only a patsy would apply https://t.co/lmXvrk6zT8
— Snow Leopard (@SpottySnowLeo) April 22, 2025
Chart: Winners and losers since 'Liberation Day'.
Deutsche Bank have helpfully created a chart showing how major assets have performed since Donald Trump’s “Liberation Day” tariff announcement.
The top performer is gold, followed by German government debt.
In last place, it’s big US technology stocks, followed by oil, for whom April 2 was more like Demolition Day.
Deutsche Bank’s market strategist Jim Reid explains:
Given that US assets went into Liberation Day as the most expensive in the world, and given that our previous work highlighted that US capitalism has benefited most from free trade globalisation, it’s not a surprise to see US assets generally at the bottom of the pile since the announcement. US equity valuations were on a par with the all-time peak in 2000 in Q1, mainly driven by tech. Since Liberation Day, the Mag-7 are down -12.6% and bottom of this pile. They are now -24.6% YTD and are still historically expensive.
Gold leads the way, with Bunds attracting flight to quality bond flows, mostly in relative terms to an underperforming US Treasury market. Indeed, the week after Liberation Day saw the biggest weekly widening in the 10yr UST-bund spread (+50bps) in data back to German reunification in 1990.
The DAX and Stoxx 600 are both down just over -5% in local currency terms, but are now slightly higher in USD terms which shows the global portfolio reallocation that is continuing. An impressive out-performance.
Updated
US conglomerate 3M has predicted that new US tariffs will hurt its earnings this year.
In its latest financial results, 3M suggest that tariffs could impact its full-year 2025 earnings by up to 40 cents a share.
3M predicted it would post adjusted 2025 earnings of $7.60 to $7.90 a share, with “additional tariff sensitivity” of 20 cents to 40 cents a share.
Updated
Argentex shares suspended after dollar slump causes margin calls
Currency risk management firm Argentex has suspended the trading of its shares, blaming the plunge in the value of the US dollar following Donald Trump’s tariff announcements and US government spending cuts.
The fall in the dollar has caused a flurry of margin calls on Argentex’s foreign exchange contracts, hurting its near term liquidity position.
In a statement to the City, Argentex says it has been exposed to “significant volatility in foreign exchange rates” this month, which had a “rapid and significant impact on its near term liquidity position”.
Aim-listed currency trader Argentex sounds alarm over impact of plunging dollar pic.twitter.com/pv7PgjyqLX
— John-Paul Ford Rojas (@JPFordRojas) April 22, 2025
The turmoil triggered by Donald Trump’s tariffs has triggered a sharp drop in investor confidence among clients at investment platform Hargreaves Lansdown.
Hargreaves Lansdown reports that investors’ confidence plummeted across the board in April, with a 35% drop in confidence in North American markets and a 28% drop in the UK.
Confidence in UK economic growth also dropped significantly (down by 43%) among HL clients.
Victoria Hasler, head of fund research at Hargreaves Lansdown, says:
“In what has been an incredibly volatile time for both markets and politics, investor confidence has tumbled.
The first week of April saw President Trump introduce tariffs across virtually all its trading partners and pretty much all goods. The extent and level of tariffs imposed sent shockwaves through markets and our survey shows that investors lost confidence in droves.
While Trump later announced a 90-day rollback on the tariffs, this came too late to be reflected in our data and, regardless, has done little to calm investors.
BoE’s Greene says US tariffs likely to be disinflationary for the UK
Bank of England policymaker Megan Greene has predicted that Donald Trump’s tariffs “represent more of a disinflationary risk than an inflationary risk” to the UK.
Speaking on Bloomberg TV, Greene explained that Britain is likely to become a destination for cheaper goods from Asia and the European Union, as it is not levying its own reciprocal tariffs in response to the US trade war.
She says:
“I think that the tariffs actually represent more of a disinflationary risk than an inflationary risk, though. And so we’ll have to see how that develops going forward.
Greene, seen as one of the more hawkish members of the Bank’s monetary policy committee, also explained that she has been on the more cautious side of the BOE’s rate-setting panel due to concerns over supply-side restraints, high wage growth and persistent inflation in the services sector.
Megan Greene, one of the BOE's most hawkish policymakers, says Trump’s tariffs "represent more of a disinflationary risk than an inflationary risk" in UK due to diversion of cheap Asian exports, a weaker dollar and the softening of demand https://t.co/RuReJKDTGF
— Bloomberg (@business) April 22, 2025
Pound on longest winning streak against the dollar since 1971
Our counterparts at Bloomberg have spotted that the pound is on track for its longest winning streak against the US dollar in over 50 years.
Sterling has risen against the dollar for the last 10 days, gaining around six cents since early April.
If it posts an 11th gain today, it’ll be the longest run of daily rises since 1971, Bloomberg say here.
Updated
Experts ponder Trump and Powell's options
City analysts are pondering whether Donald Trump is likely to give Jerome Powell the boot, and even if he could do so.
As things stand, it appears that Trump cannot legally fire the Fed chair. Last week, Powell affirmed that the Federal Reserve’s independence “is a matter of law”, and that Fed governors cannot be removed “except for cause.”
However, a case going through the supreme court may alter the power the president has over federal agencies, as explained here:
Paul Ashworth, Chief North America Economist at Capital Economics, argues that firing Powell would “just be the beginning of the Fed’s end”, telling clients:
If Trump is set on lowering interest rates then he will have to fire the other six Fed Board Members too, which would trigger a more severe market backlash, with the dollar falling and rates at the long end of the yield curve rising.
Bill Blain, principal of Wind Shift Capital Advisors, reckons there is “certainly a non-zero risk” that Trump fires Powell.
Blain writes:
As we approach 100 days of Trump some market thinkers reckon Trump has learnt critical lessons and will dial down his flippity-flop destabilisation of the US economy. I disagree. I predict the pace of instability and uncertainty will increase – not diminish.
We are moving on from Stage 1; Trump’s initial blitz of headline-grabbing orders and executive over-reach into Stage 2: the blame-game – who will be shot because it isn’t working?
On the other hand, the White House could conclude they should keep Powell at the Fed, to have someone to blame if the US economy turns sour.
Neil Wilson, Saxo UK investor strategist, explains:
It actually makes sense to keep Powell around to use as a scapegoat, plus it’s going to be very tough to shift him...the fact it’s being talked about in the open is enough to unsettle markets.
But what should the Fed chair do?
Professor Costas Milas, of the University of Liverpool’s management school, suggests some options Powell could pursue:
1) He should invite Trump to the Fed for an informative discussion (off cameras, of course) about the functioning of monetary policy. It is then up to Trump to stay quiet or (most likely) keep attacking Powell.
2) Powell and the Fed should also provide a detailed research note assessing the inflationary and recessionary risks of tariff hikes based on alternative scenarios. Doing so will strengthen the Fed’s credibility for choosing (so far) not to cut rates. Up to now they haven’t done this which allows Trump to keep attacking.
Updated
Danish consumer sentiment has dropped to a two year low, as new US tariffs fueled pessimism for the export-driven Nordic economy.
The recent selloff on US government debt (Treasuries) means the gap between US and safe-haven German borrowing costs has widened.
Good Morning from #Germany, which is increasingly seen as a new safe haven. The yield gap between 10y US Treasuries and German Bunds has widened to 1.95ppts — the highest since Feb — as investors pull capital out of the US and shift it into Europe. pic.twitter.com/Zs9LAt7Og4
— Holger Zschaepitz (@Schuldensuehner) April 22, 2025
Reuters: German firms fear impact of Trump tariffs
More than 80% of German companies in manufacturing and the information technology industry expect a negative impact on the German economy from tariffs imposed by the U.S., according to a survey by the Leibniz Centre for European Economic Research ZEW.
Reuters reports that the survey showed that 20% of the 800 companies surveyed now even fear “very negative” effects on the economy from the policies of the new U.S. government.
In industry, 46% of the companies expect negative effects on their business, with as many as 64% fearing negative consequences for the entire sector, the ZEW survey showed.
Half of the companies in industry with U.S. exports fear that Donald Trump’s presidency will have a negative impact on them. At 42%, companies without exports to the United States also expect negative effects, according to the ZEW survey.
Updated
The futures market is indicating that Wall Street will open higher, after yesterday’s sharp falls following Donald Trump’s attack on Jerome Powell.
U.S. S&P 500 E-MINI FUTURES UP 0.85%, NASDAQ 100 FUTURES UP 0.84%, DOW FUTURES UP 0.72%
— First Squawk (@FirstSquawk) April 22, 2025
Updated
Analyst fears " historic crash in US equities" if Trump keeps undermining the Fed
Donald Trump’s attacks on Jerome Powell could lead to a Wall Street crash, fears Jochen Stanzl, chief market analyst at CMC Markets.
Stanzl told clients that the “Trump trade” has devolved into what some are calling the “Sell-America trade.”
When stocks, the U.S. dollar, and Treasury bonds decline simultaneously, it signals a fundamental issue within the market. In this context, the DAX remains relatively stable partly because there is no challenge in Germany to the independence of the European Central Bank. The DAX being an outperformer during these tumultuous times sends a positive signal, as investors maintain their diversification in European equities to perform relatively better compared to U.S. stocks.
However, if Trump continues to undermine the independence of the U.S. Federal Reserve, a historic crash in U.S. equities could loom on the horizon. Stock prices are already below their levels when he won the election and are nearing his own past buy recommendations. The ongoing tariff disputes have caused significant damage to the market’s integrity. Internationally, the U.S. government’s approach is being perceived as coercive. Trump’s public attempts to undermine Jerome Powell not only add further risks but also cross a critical threshold for investors. When the fallout from these actions became too severe, the U.S. administration backed off its hardline stance on tariffs, praising Trump for “correcting his mistakes.” This raises questions about what the Republican’s ultimate intentions really are.
The independence of the Federal Reserve from political influence in the White House is crucial. Should it be compromised, the trust in the U.S. dollar—along with its status as the world’s reserve currency—could collapse. Investors are left in the dark: Is there a deliberate plan to devalue the dollar, or is Trump merely playing the provocateur once again? In times of uncertainty, investors naturally tend to express their concerns by hitting the sell button.”
Analyst: Dollar suffering from confidence bleed
The dollar “confidence crisis” is going “prime time”, fears Stephen Innes, managing partner at SPI Asset Management, as traders pile into the yen, euro and Swiss franc instead.
Innens writes:
The dollar is slipping on more than just thin liquidity and soft data — it’s slipping on faith. Markets are starting to question one of the bedrock assumptions behind the dollar’s reserve currency status: an independent, inflation-fighting Fed.
With President Trump ramping up public pressure on Powell to slash rates “now,” we’re not just flirting with jawboning—we’re staring down the barrel of a credibility unwind.
Let’s be clear: US dollar weakness isn’t just about economic cracks forming. This is a broader confidence bleed. Trump’s rhetoric signals that even the White House is front-running a slowdown. And that means the usual fallback narrative—“we’re strong, the Fed has our back”—is starting to fray.
UBS are advising investors to prepare for “a volatile path ahead”, which could mean considering gold, quality bonds, and hedge funds.
With fears over the independence of the US Federal Reserve rising, Mark Haefele, chief investment officer UBS Global Wealth Management, explains:
“Removing the Fed Chair before the end of his term in May 2026 could call into question the ability of the central bank to set interest rates without political interference, and hence the outlook for price stability.
Markets are therefore likely to be sensitive to any indication that the White House will press ahead with efforts to remove Powell, or to replace him with a more ‘malleable’ candidate after his term expires.”
Dow headed for worst April since 1932
With a week to go, April is turning into the worst month for the US stock market since the Great Depression.
The Wall Street Journal is reporting that the Dow Jones Industrial Average is headed for its worst April performance since 1932, according to Dow Jones Market Data.
The S&P 500 share index’s performance since Inauguration Day is now the worst for any president up to this point in data going back to 1928, according to Bespoke Investment Group, they add.
The Dow Jones Industrial Average is headed for its worst April since the Great Depression https://t.co/vvT2nyh3l7
— The Wall Street Journal (@WSJ) April 22, 2025
European markets drop
European stock markets are in the red this morning, as investors take their cue from the selloff on Wall Street last night.
Germany’s DAX has dropped by 0.4%, while France’s CAC is down 0.6% and Italy’s FTSE MIB has lost 1.1%.
In Denmark, pharmaceuticals giant Novo Nordisk are down more than 6% after a study found that US rival Eli Lilly’s experimental weight loss pill worked as well as Novo’s blockbuster drug Ozempic.
Updated
FTSE 100 dips in early trading
The London stock market has opened cautiously after the Easter break.
The FTSE 100 index of blue-chip shares has dipped by six points, or 0.07%, to 8269 points.
Hedge fund manager Pershing Square are the top faller, down 3%, followed by gambling firm Entain (-2.9%).
Gold hits $3,500 for first time
Worried investors are continuing to pile into gold, pushing it up to fresh record highs today.
Gold hit $3,500 per ounce for the first time this morning, extending a monster rally that has pushed bullion up from $2,623/ounce at the start of this year.
Matt Britzman, senior equity analyst at Hargreaves Lansdown, says:
The tariff tug-of-war still has no end in sight, and now the Powell power struggle is adding more fuel to the fire, with whispers from the White House about his potential ousting rattling already jittery investors. At this rate, even bad news might be seen as a buying signal - if only because something, anything, from Washington might offer a sliver of direction.
Markets are now itching for real progress on trade deals - posts from the President on Truth Social or X just aren’t cutting the mustard anymore. Investors want ink on paper, not just words, as a clear signal that movement is happening - and the clock is ticking.
This lack of certainty is sending investors right into the arms of traditional safe haven assets, with gold and the Japanese yen both cashing in on the drama.
US imposes tariffs up to 3,521% on Southeast Asia solar imports
Overnight, the US has announced plans to impose hefty new tariffs on imports of solar panels from four South East Asian countries.
The move follows an anti-dumping investigation, and means crystalline photovoltaic cells sold to the US will incur painful new trade levies.
Cambodia is hardest hit, with a new tariff of above 3,000% on its solar panels.
Bloomberg reports:
The US imported $12.9 billion in solar equipment last year from the four countries that would be subject to the new duties, according to BloombergNEF. That represents about 77% of total module imports.
Companies not named in Vietnam face duties of as much as 395.9% with Thailand set at 375.2%. Country-wide rates for Malaysia were posted at 34.4%.
Jinko Solar was assessed duties of about 245% for exports from Vietnam and 40% for exports from Malaysia. Trina Solar in Thailand faces levies of 375% and more than 200% from Vietnam. JA Solar modules from Vietnam could be assessed at about 120%.
The new tariffs follow an investigation by the U.S. Department of Commerce into claims by American producers that Chinese companies in those countries were dumping solar cells and panels in the U.S. at artificially low prices.
Thailand says talks with US over Trump tariff plan delayed
Earlier today, Thailand revaled that talks with the US over tariffs have been postponed.
Thai-U.S. trade negotiations have been scheduled to take place tomorrow (April 23). But Thailand, which is seeking a reprieve from Trump administration’s plan to levy a 36% tariff on its goods, has said ministerial level talks have been delayed.
Prime minister Paetongtarn Shinawatra has said the schedule for talks has been adjusted because the US has asked Bangkok to review important issues.
Paetongtarn said that Thai agriculture exports and additional imports were being examined, and insisted:
“We’re not too slow and we are reviewing issues, including our tariffs that may be adjusted appropriately.
“We are consulting academics and all parties and doing our best in this situation.
“We are protecting the agricultural interests as much as possible.”
Bloomberg: Japan’s Kato aims to further FX dialogue with Bessent this week
Japan’s Minister of Finance Katsunobu Kato said today he aims to build on close discussions pertaining to currencies when he meets his US counterpart Scott Bessent in Washington this week, Bloomberg reports.
Kato told a press conference today:
“Treasury Secretary Bessent and I are in close contact on currencies, and I would like to take this opportunity to hold further discussions during my visit.
Kato was scheduled to depart for Washington today, where he’ll represent Japan at a series of meetings including Group of 20 and International Monetary Fund gatherings. He said the timing for a meeting with Bessent is still under discussion.
Updated
Pound at seven-month high
The weakness of the dollar has pushed the pound up to its highest level against the US currency in seven months.
Sterling climbed to $1.3423 in early trading, up around half a cent, to its highest level since last September.
Updated
Reeves to make case for free global trade at Washington IMF talks
Rachel Reeves will fly to Washington this week to argue for global free trade in the face of Donald Trump’s punitive tariffs, amid continued international economic turbulence.
The UK chancellor will use the spring meetings of the International Monetary Fund, which is attended by top finance ministers and central bankers, to make the case that free trade is in both British and global interests.
One senior official said:
“We’re facing a new economic reality, but we’re a heavily trading country, with the value of our exports the equivalent of 60% of GDP, so it’s always in our own interests to promote free trade.”
Reeves will urge the Trump administration to cut punitive tariffs on UK car and steel exports and step up negotiations for a trade deal when she meets the US Treasury secretary, Scott Bessent, for the first time, allies said. He is seen as one of the less hardline US voices on trade.
Dollar hits three-year low as Trump's attacks on Powell worry investors
Good morning, and welcome to our rolling coverage of business, the financial markets, and the world economy.
The US dollar has sunk to a three-year low as the exodus from US assets gathers pace.
Traders are anxious after Donald Trump launched another blistering attack on America’s top central banker yesterday, calling Jerome Powell “Mr. Too Late” and “a major loser”, as the US president intensified his calls for US interest rate cuts.
This has pushed the dollar down against a basket of currencies to its lowest level since March 2022.
Against the yen, the dollar has hit a seven month low, trading at ¥140 for the first time since last September.
Last week, Trump posted that “Powell’s termination cannot come fast enough”.
Tony Sycamore, market analyst at IG, says Trump’s attacks on Powell are leading to a lack of confidence in the markets:
Their relationship has long been contentious. Despite appointing Powell in 2017, Trump has since expressed regret, criticising Powell for “bad decisions” and being “always too late and wrong.”
Powell has countered by warning that Trump’s tariffs could spur higher inflation and slower growth, contradicting Trump’s claims of his policies’ economic benefits.
Yesterday (when European markets were closed), there were further losses on Wall Street, where the Dow Jones Industrial Average lost another 2.5%, or almost 1,000 points.
Investors are also disappointed at the lack of progress in trade talks, following the hefty tariffs announced by Trump earlier this month.
This is creating a worrying situation, in which the dollar, the US stock markets and US government bond prices are all falling. Typically in a crisis, US government debt and the dollar would rally as traders sought out a safe haven.
“The market reaction is arguably more about broader investor concerns that less credible US policy-making may erode the exorbitant privilege that has allowed the US to run high twin deficits than it is about the specific risk of political influence over the Fed’s rates policy,” explains Jim Reid, market strategist at Deutsche Bank.
The International Monetary Fund (IMF) will give its verdict on the economic consequences of the US trade war later today, when it releases the latest forecasts in its World Economic Outlook.
Central bank governors, finance ministers, and other economic leaders are heading to Washington for the annual IMF-World Bank Spring Meetings.
The agenda
9am BST: ECB Survey of Professional Forecasters
2pm BST: International Monetary Fund releases its latest World Economic Outlook.
3pm BST: European Union Consumer Confidence report
3.15pm: IMF releases its Global Financial Stability Report
Updated
