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"If currency devaluation becomes the norm amid tariff wars, savers could see their returns plummet below 3%"

Journalist: Tony Redondo, Newspage

ended 22. April 2025

So far this year, the Dollar Index has fallen more than 9%, causing the Pound and Euro to hit three-year highs against the greenback. With the Bank of England expected to cut next month, and Trump applying pressure on Federal Reserve chair, Jerome Powell, to cut, Newspage asked experts how countries cutting or seeking to devalue their currencies could impact businesses, borrowers and savers. One said: “If currency devaluation becomes the norm amid tariff wars, savers could see their returns plummet below 3%.” A second added: “While a cut may ease borrowing costs and support business investment, it poses challenges for savers already hit by low returns. UK consumers may benefit from stronger buying power on imports, but exporters must now adapt to a tougher trading environment.” A third said: “Borrowers may benefit if the stronger Pound helps ease inflation and persuades the Bank of England to hold off on further rate hikes. But savers could find themselves stuck with lower returns for longer.” Views below.
 

4 responses from the Newspage community

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Editor
Tony Redondo
Founder at Cosmos Currency Exchange
The Dollar Index’s shocking 9% plunge in 2025 has sent the Pound soaring to three-year highs. The Bank of England is expected to cut rates by 0.25% to 4.25% on 8 May and to 3.5% by year-end, lowering borrowing costs for mortgages and business borrowers alike. If currency devaluation becomes the norm amid tariff wars, savers could see their returns plummet below 3%. The Bank of England is in a bind. With GDP growth stalled and wage growth at a stubborn 5.9%, Threadneedle Street might gamble on a series of monthly rate cuts to dodge a UK recession, but global chaos looms large. Consumers might grab cheaper US imports, but with inflation roaring toward 3.7% and Trump’s tariffs biting, domestic wallets could still take a hit. Exporters are reeling. A beefy Pound and US tariffs make British goods painfully pricey, threatening a revenue nosedive.
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Editor
Scott Gallacher
Director at Rowley Turton
For UK consumers, the weaker Dollar means that long-awaited trip to New York or taking the kids to Disney World or Universal in Florida just got cheaper. US-manufactured goods should also become more affordable, offering some much-needed relief amid ongoing cost-of-living pressures. It’s also a modest boost for US businesses, many of which have been suffering from a sharp drop in tourism and a quiet global backlash. But for UK exporters, it’s quite the opposite. A stronger Pound makes British goods more expensive abroad — and when you factor in the threat of Trump’s tariffs, it’s a double whammy that could seriously dent margins and competitiveness. Borrowers may benefit if the stronger Pound helps ease inflation and persuades the Bank of England to hold off on further rate hikes. But savers could find themselves stuck with lower returns for longer. All eyes now turn to the Bank of England’s 8 May meeting.
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Prem Raja
Head of Trading Floor at Currencies 4 You
With EUR/USD at 1.15 and GBP/USD at 1.34, there are clear opportunities for businesses with USD exposure, particularly those importing from the US or China. Conversely, UK exporters are facing increased pressure, with stronger Sterling eroding overseas competitiveness. The Dollar Index has dropped over 9% year-to-date, driving the Pound and Euro to three-year highs against the Dollar. Attention now turns to the Bank of England’s 8 May meeting, with a rate cut expected this quarter. While a cut may ease borrowing costs and support business investment, it poses challenges for savers already hit by low returns. UK consumers may benefit from stronger buying power on imports, but exporters must now adapt to a tougher trading environment. In this shifting landscape, proactive currency risk management is critical.
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Keith Budden
Managing Director at Ensurety
In the short term, for the UK consumer this could be good news - a Disney holiday will probably never be as cheap again as it is today thanks to the strength of the Pound against the Dollar. However, for business, especially those who export to the US, the weak dollar plus Trump's tarriffs mean that the market is increasingly difficult. However longer term I think there are broader signals that should concern us all: the Dow Jones is looking set to have its worst April since the great depression, the US under Trump is becoming increasingly isolationist, and with Putin showing no credible signs of weakening his aggression in Ukraine, the similarities with 90-odd years ago are painful to examine. I hope I'm wrong, and things will turn around, but if I'm right and things don't turn around, then the expression "You ain't seen nothing yet" could never be more relevant than it is today.