Tariff Tensions: Markets on Edge as Dollar Strengthens

The pound declined against the dollar amidst U.S. tariff threats, breaking a recent rise. Investors expected Trump's trade policies to fuel growth and inflation, supporting the dollar. Speculation about American trade tariffs remained significant, contributing to market uncertainty and shifts in safe-haven assets.

The British pound dropped against the dollar on Tuesday, ending a three-day rally as investors shifted their focus to U.S. tariff threats. This follows Monday's technology stock selloff and a move towards safer assets.

The U.S. dollar, which surged post-election last November, has been under strain as expected tariffs under President Trump have not materialized. Markets had anticipated that Trump's trade policies would enhance U.S. economic growth and drive up inflation, thereby supporting higher interest rates and the dollar.

President Trump announced plans to tax imported computer chips, pharmaceuticals, and steel, prompting a strengthened dollar against other currencies. Market volatility persists, with investors watching central bank meetings this week, anticipating interest rate decisions from the U.S., European, and UK central banks.

(With inputs from agencies.)