How a Trade War Impacts Currency Exchange Rates

What’s happening in global trade right now?

The latest news shows important changes in world politics and trade. Former President Trump is back in focus, affecting a possible new US-China trade deal after his well-known “Liberation Day” event. Recently, he received praise in the UK for helping to advance the UK-US trade agreement.

Markets are reacting to the news. Chinese exports to the US dropped by 20% after the recent US tariffs. Now, China seems prepared to go back to trade talks. Global stock markets are looking up because of this news. However, currency markets are not as active—for the moment.

If you want to send money to another country or look at currency exchange rates, these updates are important. Timing currency conversion before big news about policies or the economy can impact the amount of foreign currency you get. A good international money transfer plan is very crucial when the markets can change quickly.

Why do trade tensions move exchange rates?

A trade war can affect a currency’s value in several ways. Trade problems can reduce exports and make investors feel less confident. They can also lead central banks to change interest rates. All these reactions play a role in deciding how much one currency is worth compared to another in the foreign exchange market. When countries set tariffs or introduce new trade agreements, it affects how goods, investments, and currency values move. For example:

• Higher tariffs make trade less, especially for Chinese imports.
• Lower exports change the economic outlook for countries like Germany and New Zealand that rely on trade.
• Investors move money to safer currencies such as the Japanese yen (JPY) or the Swiss franc (CHF).

Political figures, like Donald Trump, can have an indirect effect on foreign exchange markets. They do this through their remarks about trade policy uncertainty.

How is the Pound Sterling responding?

Right now, the GBP/EUR exchange rates are increasing a little. This could show that people feel more confident about the market again, especially after the UK and US aligned on trade. It might also be due to guesses about how well the UK economy will do.

Volatility might come back fast. The Bank of England (BoE) is giving several speeches after last Thursday’s interest rate decision, which lowered rates to 4.25%. Currency traders will keep a close eye on these talks for hints about future monetary policy.

This is important for big trading partners in Europe. This includes those in the eurozone. If the European Central Bank (ECB) announces a change, it could affect how strong the euro (EUR) is compared to the British pound and the US dollar.

If you want to change pounds or get foreign money, it’s a good idea to fix rates before any surprise changes happen. Check out Free Price Compare’s international money transfer services to see your options and compare currency exchange rates from leading providers.

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What other news could impact currency markets this week?

UK Economic Calendar:

• Monday: Speeches from the Bank of England
• Tuesday 00:01: BRC Like-for-Like Retail Sales
• Tuesday 07:00: UK Unemployment Rate is likely to go up to 4.5%

US Economic Calendar:

• Tuesday 1:30 PM: US Inflation Report, expected to be 2.4% per year

These signs directly affect how the market expects things to go. This shapes if the GBP, USD, or EUR goes up or down. The Federal Reserve System and the Federal Open Market Committee (FOMC) play important roles in setting interest rate trends in the United States.

How political uncertainty affects exchange rates

Political surprises, such as changes in leaders, referendums, or tensions between countries, create uncertainty. This often makes investors look for safer assets. As a result, currency flows can change quickly.

Other currencies to keep an eye on are the Australian dollar (AUD), Canadian dollar (CAD), and New Zealand dollar (NZD). The Reserve Bank of Australia, Bank of Japan (BoJ), and ECB provide key guidance that affects cross-border transfers. When the markets change, a timely international money transfer can help you avoid losses or grab opportunities.

In uncertain times, many people check different currency exchange providers. They want to secure a good rate or set alerts to track market changes.

Why does timing matter when sending money abroad?

Currency exchange rates can change quickly, sometimes in just a few hours. For example:

• A 1% fall in the GBP/USD rate for £10,000 equals £100 less in the currency received.
• Waiting until after an important announcement can mean missing out on chances.

If you want to do a big transfer for things like property, tuition, or business, it’s a good idea to keep an eye on rates. You should consider using a service that lets you set forward contracts or limit orders. Many platforms also have apps you can use to manage your transfers and check on depreciation risk.

At Free Price Compare, you can look at different options for currency exchange. These options come from trusted partners who are registered with the Financial Conduct Authority (FCA) and listed on the Financial Services Register. Our international money transfer comparison service helps you see live rates, choose the best provider, and make your transfer safely.

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Correct as of 13 May 2025

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