22 April 2025: Reeves is in Washington for the IMF Spring meeting

Rachel Reeves will fly to the U.S. today to attend the IMF Spring meeting and talk with members of the Trump Administration to try to advance negotiations about a free trade deal between the UK and the U.S.

Her trip takes place as global markets have seen further significant volatility, which has seen the pound climb to three-year highs against the dollar.

She will meet U.S. Treasury Secretary Scott Bessent to try to agree on a deal to ease U.S. levies on UK exports to the U.S.

The Chancellor will also attend the spring meetings of the International Monetary Fund, which are attended by top finance ministers and central bankers, to argue that free trade is in both British and global interests.

The events that began on April 2nd have seen the global economy become fractured almost to the point at which it has become a case of “every man for himself”.

One Treasury senior official was quoted as saying, “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 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 Bessent, for the first time, allies said. He is seen as one of the less hardline US voices on trade.

The Chancellor is expected to underline that the UK will not strike a deal at any cost. Speaking before she left for the US, she said: “Any deal that can be secured will always have front and centre British national interest.”

The IMF’s spring meetings will take place against the most fraught economic backdrop since the Covid pandemic, with Trump’s trade barriers weighing heavily on big economies including the EU, China and the US itself.

The IMF is expected to downgrade its expectations of global growth and warn of the growing risk of financial instability when its latest forecasts are published later.

Reeves will meet other nations’ finance ministers over the next few days to try to forge a united front in the face of continued disruption being caused by Trump’s so-called “liberation” of U.S. trade.

Keir Starmer and his New Zealand counterpart, Christopher Luxon, are expected to agree to deepen defence and security ties, including stepping up support for Ukraine, when they meet on Tuesday, Starmer's office said.

The leaders will see first-hand the work the armies of both countries are doing to train Ukrainian forces in the southwest of England, Starmer's office said, and Luxon was expected to confirm support for the initiative until the end of the year. They will also discuss trade between the two nations as Starmer tries to consolidate global efforts to combat Donald Trump’s imposition of tariffs, which threaten trading terms throughout the developed world.

The pound reached a high of 1.3450 yesterday as the dollar fell further following Trump’s verbal attack on the Federal Reserve and its Chairman, Jerome Powell. It eventually closed at 1.3380 in thin trading conditions.

US stock markets may officially enter bearish territory soon, but that could be the least of the worries for market analysts and participants. The ripple effect of an escalating trade war with China, US President Donald Trump’s sharp attack on the Federal Reserve chairman, and the rising US Treasury yields are all raising fundamental questions about the US economy.

US stock markets experienced sharp declines on Monday as Trump intensified his criticism of Powell. This heightened concerns amongst investors regarding the central bank's autonomy, whilst they simultaneously dealt with the uncertainty caused by Trump's unpredictable trade policies.

Central Bank Independence is ingrained in the U.S. Constitution, and should Trump try to meddle with that, he would be opening a whole new “can of worms”.

Trump’s criticism of Powell is nothing new. He started calling out Powell, the Fed chair he appointed in 2018, during his first administration, but did so aggressively again last week after Mr. Powell cautioned the current trade war could send inflation higher.

Should that happen, the Fed will have to consider raising interest rates again to combat rising prices, something Trump dislikes because he wants falling rates to stimulate the economy.

Yesterday, Trump took to Truth Social and had tough words for Mr. Powell again, warning the economy will slow “unless Mr. Too Late, a major loser, lowers interest rates.” The “too late” nickname is a reference to criticism that Mr. Powell, and many other central bankers, were slow to raise interest rates in 2022 because they assumed inflation would be transitory, or a short-term event.

Several members of the Federal Open Market Committee, including Patrick Harker, Neel Kashkari, Thomas Barkin and Federal Reserve Member Adrianna Kugler, are making speeches today in which they will likely defend Fed policy and, by extension, Jerome Powell.

The President has imposed a range of tariffs, including a 10% tax on most imported goods, plus levies on steel and aluminium, as well as a 145% tariff on Chinese goods.

Meanwhile, his administration is actively negotiating separate trade deals with dozens of countries to avoid even steeper tariffs, which are currently on hold.

The uncertainty has led to a sell-off, especially amongst tech stocks, as the tariffs could significantly hit their revenue, said market analyst Dan Ives. The extent of the possible damage is not yet clear, with so many trade negotiations underway.

“This has created an unprecedented environment for tech companies to navigate, and Trump’s Powell comments just add fuel to the fire,” Ives said. The added uncertainty, Ives said, “has left investors in a dark tunnel with no light to guide them.”

All three major U.S. indexes tumbled more than 2% on Monday, and the U.S. dollar continued to get hammered, sinking to a three-year low against a basket of major currencies. U.S. Treasury yields, which are the effective interest rate on U.S. debt, also jumped, suggesting investors see these bonds as riskier investments.

The dollar index fell to a low of 98.07 and closed at 98.12.

Following the decision to cut official interest rates by a further 25 basis points last Thursday, ECB President Christine Lagarde widened the scope of her speech to include various topics currently affecting the Eurozone economy.

The ECB is focusing on the trade war unleashed by U.S. policies, which could weigh on economic growth in the eurozone.

According to Lagarde, "Increased uncertainty is likely to reduce confidence among households and firms, and the adverse and volatile market response to the trade tensions is likely to have a tightening impact on financing conditions."

The latest data reflects an economic cooling, with euro area GDP growth slowing to 0.2% in Q4 2024, down from 0.4% in the previous quarter.

Washington’s embrace of crypto may endanger the European financial system, but Frankfurt and Brussels are arguing over whether to rewrite a landmark law.

Battle lines are being drawn between the European Central Bank and the European Commission over whether rules to govern cryptocurrencies are strong enough to withstand the full force of Donald Trump.

The ECB thinks the U.S. president's lavish support for the American crypto sector risks causing financial "contagion" that could blow up the European economy, according to a policy paper published last week.

ECB President Christine Lagarde emphasised the “exceptional uncertainty” in the global economic outlook, primarily due to trade barriers and inflation risks. The recent imposition of tariffs by U.S. President Donald Trump has intensified these challenges, affecting both supply and demand dynamics within the eurozone. ​

Despite a temporary 90-day suspension of some tariffs, the potential for prolonged trade disputes looms, prompting the ECB to take preemptive measures to support economic growth and maintain inflation targets. ​

“Inflation in the eurozone stood at 2.2% in March, aligning closely with the ECB’s 2% target. Nonetheless, the Central Bank remains vigilant, ready to adjust its policies in response to evolving economic indicators and external pressures”.

The ECB’s decision underscores its commitment to fostering economic stability in the face of global uncertainties. “As trade negotiations continue, and geopolitical dynamics evolve, the central Bank’s data-dependent approach will be crucial in navigating the challenges ahead.”​

For businesses and consumers, the rate cut may translate to more favourable financing conditions, potentially stimulating economic activity across the eurozone. However, the broader impact will depend on the resolution of trade tensions and the resilience of global markets.

Last week’s cut may well be the last in the current cycle, with members of the Central Bank’s Governing Council believed to be considering a pause before “Liberation Day” happens.

The Euro is now firmly in bullish territory, with a rally to the 1.20 level entirely possible. Yesterday, it climbed to a high of 1.1570 and closed at 1.1511.

Have a great day!