Image: Official U.S. Government image.
Bessent keeps the good vibes flowing.
The British Pound is rising against the Euro, Dollar and other major currencies amidst a decline in global equity market volatility.
A measure of volatility in the U.S. S&P 500 index eased 23.37, having been as high as 60 in early April, helping the risk-sensitive Pound advance against major peers.
"Equity volatility has already normalised to a considerable extent," says a weekly foreign exchange update from strategists at Barclays. "We maintain our bullish sterling view."
In a recent interview with CNBC, U.S. Trade Secretary Scott Bessent said that many countries have offered "very good" tariff proposals, raising hopes that some tangible good news on the tariff front was close at hand.
Bessent said the U.S. government was in contact with China and expressed a desire to avoid escalation, saying that China might want to de-escalate as well.
The Treasury Secretary also mentioned that there have been substantial talks with allies in Japan and that India might be one of the first countries with which the U.S. signs a trade deal.
Volatility spiked in early April after U.S. President Donald Trump announced a severe regime of import tariffs, prompting a market decline amidst fears the U.S. and global economies would buckle under the taxes.
The increase in fear corresponded with a selloff in the value of the Pound against the Euro and other 'safe haven' currencies, such as the Franc and Yen. However, currencies with a higher sensitivity to risk, like the Australian and New Zealand Dollars, saw the most severe pressure.
Above: GBP on April 28.
Fears soon began to fade as Trump made clear the tariffs represented a starting level and that there was ample scope to negotiate down the rates, prompting a decline in volatility, which is impacting FX market performances.
Bessent's comments add further downside pressure to volatility as it suggests markets have passed 'peak tariff' fear.
The Pound-to-Euro exchange rate rises to 1.1763, its highest rate since April 07. The Pound-to-Franc exchange rate is at 1.1068. The Pound-to-Yen rises to 191.35, just below Friday's three-week peak at 191.72.
However, the Dollar has broken its traditional relationships with other asset classes and is seemingly struggling no matter the weather. The Pound-to-Dollar exchange rate has risen to 1.3412, which means it could be on course to register its highest daily close since last July.
Above: GBPEUR (top) and the volatility index.
The Dollar is meanwhile tipped to come under further pressure as President Donald Trump's tariffs lead to a collapse in imports in the coming weeks and months.
One of the most reliable ways of anticipating U.S. trade developments is to monitor shipping, and it is clear the U.S. is about to see a drastic reduction in imports, which account for trillions of dollars of U.S. GDP.
"In the 3 weeks since the tariffs took effect, ocean container bookings from China to the United States are down over 60% industry-wide," says Ryan Petersen, Founder and CEO of Flexport.
"If the tariffs on China continue at this level, will we see a $2T hit to economic activity in our country, the failure of tens of thousands of American businesses, and the laying off of millions of employees?" he adds.
Analysts fear a spike in U.S. inflation, empty shelves and job layoffs in the coming months as the reality of tariffs bites. The clear market consensus is that these developments are not constructive for the Dollar.