As we enter the first quarter of 2025, trade tensions heavily influence market sentiment, with Trump’s tariffs narrative shaping the overall momentum. Volatility has gripped major asset classes – including FX, bonds, and equities – as markets attempt to gauge the scale, timing, and likelihood of these tariffs being fully implemented. While Chinese New Year holidays traditionally bring a quieter tone to the first quarter of the year, tariff announcements - such as a 10% tariff on Chinese imports and a 25% tariff on aluminium and steel - are injecting moderate volatility into the metals complex. What can we expect in the metal markets in the first months of 2025?
President Trump’s latest trade announcement and a subsequent 90-day pause for most countries jolted currency markets, but the pound’s reaction diverged from conventional expectations. In this month’s outlook, we assess how the UK’s relative insulation from US tariffs has paradoxically coincided with growing downside pressure on sterling, driven primarily by a sharp repricing of Bank of England rate expectations. We explore how this interacts with the UK's fiscal stance, recent macroeconomic data, and evolving trade vulnerabilities—particularly considering continued pressures from US tariffs. With the euro supported by a more measured shift in ECB policy and the EU’s cohesive trade response, we ask: what does this divergence mean for the pound in the months ahead?
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With a new government in place and a challenging global environment, what does 2025 hold for the UK economy?
Shanghai, China
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