16 April 2025: Political donors are deserting both main parties

The UK has been placed firmly at the centre of Donald Trump’s battle for supremacy with China as it tries to salvage at least part of the UK steel industry, which has been ravaged to such an extent in recent years that the blast furnace in Scunthorpe, which has been the subject of significant discussion this week, is all that remains of the country’s once dominant steel production.

As accusations continue to be made over “sabotage”, the Government is taking more practical steps to ensure that such a situation does not recur.

Research has shown that British firms are shutting down Chinese investment in the UK. A significant majority of British companies looking for foreign investment would prefer not to have Beijing-based businesses bid, This is despite Rachel Reeves’ much-publicised visit to the Chinese capital last year in which her main aim was to “drum up” Chinese investment in UK infrastructure and tech projects.

A recent survey showed that most businesses in the healthcare, defence, and communications sectors would prefer to see Chinese firms excluded from bidding.

Business Secretary Jonathan Reynolds said over the weekend that there would be a 'high trust bar' for Beijing-connected companies to gain stakes in the UK in the future. However, the Government has been engaged in efforts, including the Chancellor's trip, to woo the world's second-largest economy as it desperately seeks ways of fuelling growth.

As Donald Trump’s real motive for creating turmoil in global markets becomes clearer, the Prime Minister has found himself unwittingly doing the U.S. President’s bidding in limiting Chinese investment in one of its most favoured markets.

The latest data for employment was published yesterday, with the Office for National Statistics reporting that 206K new jobs were created in the three months to February, substantially more than in the previous reporting period.

The ONS reported that the ILO Unemployment Rate came in line with estimates and the prior release of 4.4%. The scenario of upbeat employment data is favourable for the pound. However, financial markets expect that employers could slow down their hiring process in the face of an increase in contributions to social security schemes and the higher national living wage starting this month.

Meanwhile, Average Earnings Excluding Bonuses, a key measure of wage growth and inflation, grew at a slightly slower pace of 5.9% compared to estimates of 6%. In three months ending January, the wage growth measure rose by 5.8%, downwardly revised from 5.9%. Average Earnings, Including Bonuses, rose steadily by 5.6% but slower than the expectations of 5.7%.

The data is unlikely to change the market's view that the Bank of England will cut rates by twenty-five basis points at its May meeting.

The pound remains well-supported despite the likely loosening of monetary policy. Yesterday, it climbed to a high of 1.3248 as it broke through resistance around the 1.3200 level and closed at 1.3232.

The Washington rumour mill is being fed stories, most likely emanating from the Oval Office, that President Trump is considering replacing Jerome Powell as Chairman of the Federal Reserve as soon as this Autumn.

Trump has clashed on several occasions with Powell since he appointed the former litigator early in his first term in office. It is felt by the markets that Powell has proved a highly effective Central Banker, despite economics not being his speciality.

Trump wants the Central Bank to cut interest rates to provide some comfort to consumers, as the effects of his tariffs are expected to see inflation climb again.

Were they to do this, Powell and his colleagues would be flying in the face of their mandate, which is to promote maximum employment, stable prices, and moderate long-term interest rates.

This is commonly referred to as the "dual mandate". While the Fed focuses on achieving these two goals, it also has other responsibilities, including supervising and regulating banks, maintaining financial system stability, and providing financial services, but these are of little interest to Trump, who believes in a free market with little regulation.

The U.S. dollar index slipped back below the 100 mark, hovering near three-year lows, as investors awaited a closely watched speech by Federal Reserve Chair Jerome Powell later today.

Markets are on edge as the Fed faces the delicate task of supporting economic growth while managing the risk of tariff-driven inflation. While talk of a recession arriving later in the year is receding, the FOMC will need to keep an eye on the leading indicators to confirm, at least to itself, that GDP remains on track.

US Treasury Secretary Scott Bessent told reporters yesterday that he was optimistic about "clarity" on tariffs and progress on key trade deals over the next 90 days, as President Trump simultaneously sought to ramp up pressure on China to come to the negotiating table. China has never needed much encouragement to discuss trade as it seeks to solidify what it sees as its rightful place at the “top table” of world trade matters.

"Let's set aside China. There are 15 large trading partners. We set aside China," Bessent told reporters, using his boss's tactic of discussing policy at press conferences. There are 14, and we're in rapid motion and setting up a process for the 14 largest trading partners."

The dollar index briefly slipped, having returned above the 100 level, as further sellers emerged. It fell to a low of 99.90 and has continued to look weak in early Asian trading.

The Euro has been the subject of significant volatility during April. ECB President Christine Lagarde told reporters yesterday that the Central Bank is mindful of the effect of volatility on companies that trade outside the Eurozone.

US President Donald Trump’s on-and-off tariffs have clouded the picture for European Central Bank policymakers meeting this week to decide whether to lower eurozone interest rates again.

After five straight cuts that brought the central bank’s borrowing costs down from historic highs, the ECB looked open to declaring a pause in its monetary policy easing on Thursday.

However, Trump’s move to impose sweeping tariffs on the European Union and the rest of the world increased the chances of another reduction in interest rates, according to observers.

Even after the US President last week announced a 90-day pause in the implementation of higher duties on many countries, leaving just a global baseline 10% tariff intact, the probability remained.

Eurozone financial markets are functioning well despite global turbulence, and the European Central Bank is ready to deploy its financial instruments to maintain financial stability if necessary, ECB President Christine Lagarde told delegates at a conference yesterday.

Markets have endured a brutal time since April 2nd, marked by the eruption of an all-out trade war and a bond market selloff that has ignited fears of a global recession and shaken confidence in U.S. assets.

Several of Lagarde’s colleagues on the ECB’s Governing Council have spoken of their concerns that Trump’s continued rhetoric, since that is what his “measures” have become, is damaging global confidence in the entire financial system, which like it or not, is based around the dollar as the world's preferred means of exchange.

French Central Bank Governor Francois Villeroy de Galhau has expressed his concerns that Trump's actions have eroded confidence in not just the dollar but the entire financial system, and he believes that the Eurozone should seize the opportunity to show the global leadership that the size of its market allows.

The euro was again the most volatile of G7 currencies yesterday. It traded between 1.2357 and 1.1258 and closed at 1.1332. Traders are still unable to express real confidence in the single currency due to the disparate nature of fiscal control, which is still in the hands of several individual states.

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