How Trump’s Policies Impact FX Rates and the UK Market

4 February 2025

Table of Contents

The inauguration of Donald Trump had a profound impact on global markets, and while his direct influence on the UK may seem minimal at first glance, his policies and unpredictable approach to governance have created ripple effects that are felt internationally. Trump’s leadership style, with its emphasis on bold, often unconventional economic decisions, has introduced a layer of unpredictability that shapes global trade, currency valuations, and investment flows — all of which impact the UK, and international currency exchanges.

Global Trade Confidence and Economic Uncertainty

Under Trump’s administration, there has been a strong focus on renegotiating trade agreements and prioritising US interests. While his “America First” rhetoric initially caused global concerns about protectionism, these policies have had nuanced effects. On one hand, trade barriers and tariffs could disrupt established supply chains, but on the other, Trump’s pursuit of stronger bilateral trade deals has created both opportunities and uncertainty in international markets.

This uncertainty can drive investors to safer assets, including the UK property market, known for its stability and long-term growth potential. The unpredictability of global trade relations under Trump could cause investors to look for hedges in assets less tied to the outcome of US trade policies, such as UK real estate.

Investor Confidence and Pro-Business Environment

Trump’s administration has historically promoted pro-business policies, such as tax cuts and deregulation, aiming to stimulate US economic growth. These measures, along with his approach to deregulating industries like cryptocurrency, can encourage risk-on sentiment among global investors. In turn, this can lead to increased capital flows into more stable markets like the UK, particularly in real estate.

For example, if Trump continues his trend of reducing corporate taxes and creating a more business-friendly environment, it could fuel optimism and risk appetite globally. UK-based assets become increasingly attractive to investors seeking a safe yet lucrative destination for capital preservation and growth.

The Strength of the US Dollar: Fiscal, Monetary, and Trade Policies

One of the most immediate impacts of Trump’s economic policies is their effect on the strength of the US dollar. Republican administrations are traditionally associated with fiscal conservatism, focusing on lower taxes and reduced government spending. This could lead to smaller budget deficits, which, in turn, may strengthen the USD due to lower inflationary pressures.

Additionally, while the Federal Reserve operates independently, Republican policies often align with a more hawkish stance on monetary policy, which could lead to higher interest rates. These higher rates can attract foreign capital, further boosting the demand for USD-denominated assets. The combination of fiscal conservatism, potential interest rate hikes, and a more protectionist approach to trade could make the USD a stronger currency, reinforcing its position as a global safe-haven asset.

Impact on Major Currency Pairings and the UK Market

As the USD strengthens under Trump’s leadership, it affects global currency markets, including key pairs like GBP/USD. Here’s how:

  • EUR/USD: A strengthening USD often results in a weaker Euro, particularly if expectations of pro-growth policies in the US materialise. However, this weakness is not guaranteed and will depend on the Eurozone’s own economic performance and the European Central Bank’s policies.
  • GBP/USD: The British pound could weaken against the US dollar, but this relationship is heavily influenced by domestic UK factors, such as Brexit developments or changes in UK monetary policy. A more protectionist US trade policy might create uncertainty in UK-US trade relations, potentially exerting downward pressure on GBP.
  • USD/JPY: The Japanese Yen’s response is more complex. If global growth accelerates, as expected under Trump’s policies, the USD may appreciate against the Yen. However, if Trump’s policies are seen as heightening trade tensions, the Yen’s safe-haven appeal could cause it to strengthen.
  • USD/CAD: The Canadian dollar could weaken against the USD, especially if US policies negatively affect Canadian trade. However, this would also depend on the price of oil, as Canada is a major oil exporter, and energy policies could offset some of the impacts.
  • Emerging Market Currencies: Emerging market currencies often suffer when the USD strengthens. Higher US interest rates can divert capital away from emerging markets, diminishing the appeal of their higher-yielding currencies. Additionally, if Trump’s policies lead to heightened trade tensions, emerging markets may face additional pressures.

Source: Money Corp

The UK Property Market as a Safe-Haven Investment

One of the more subtle effects of a strong USD, and one of particular interest to UK property investors, is the increased purchasing power it grants foreign investors. A stronger US dollar means that overseas investors, particularly from the US, can acquire UK properties at a more attractive exchange rate. This creates opportunities for high-net-worth individuals to purchase premium assets in the UK, a market still seen as stable, transparent, and relatively insulated from some of the more volatile aspects of global politics.

In particular, destinations like London and other major UK cities are often seen as safe havens for international capital, even in times of global economic uncertainty. As the US dollar strengthens, these regions become more accessible to investors looking to diversify their portfolios away from US-centric assets.

While Trump’s unpredictable approach to international trade, monetary policy, and regulation creates an uncertain global economic environment, his policies also fuel investor confidence and create opportunities for international investment in the UK, especially in real estate.

1693645345031 1

Lewis Finn

Experienced Sales Manager with a demonstrated history of working in the financial services industry. Specialising in offshore investments & UK investment property.

Table of Contents

Latest Articles

Request a Callback

Request Callback