Category Archives: Business

Britain, Business, Economic, Financial Markets, Government, International trade, United States

The US dollar: down but not out

ECONOMIC

Intro: Reports of the declining status of the US currency have been greatly exaggerated

For economists, the impact of a falling US dollar and how that impacts Britain will be observed and monitored closely. Of interest will be why the dollar has fallen of late, what President Trump’s attitude is towards the US currency, and how that impact will be felt.

The dollar lost around 2pc during January against a basket of major currencies (as measured by the DXY index). At the time of writing, the DXY is close to a four-year low of 96.79 – a staggering 10.7pc lower than this time last year. This significant weakening of the dollar has been driven by US policy shifts, tariff uncertainties, and geopolitical tensions. It also, to a lesser extent, reflects global effort to “de-dollarise” led by China and other large emerging markets.

Just days ago, the Federal Reserve held its main policy rate at 3.5-3.75pc. But the US central bank previously cut rates by 25 basis points at three consecutive meetings – in September, October, and December 2025. Lower rates typically weaken the dollar by reducing its appeal to yield-seeking investors, prompting capital flight to higher-return assets elsewhere. Financial markets are anticipating one or two more US rate cuts in 2026, putting further downward pressure on the dollar.

Since Trump took office last January, Fed boss Jerome Powell has come under intense pressure to cut rates faster and further, with the President eager to stimulate investment.

Nominated by Trump during his first term and reappointed four years later by President Biden, Powell has resisted. He has warned of the dangers of US inflation – 3pc as recently as September and still up at 2.7pc, above the 2pc target. Trump’s announcement that he wants Kevin Warsh as the next Fed boss when Powell’s term ends in May has seen the dollar strengthen, given Warsh’s reputation as an inflation-fighting hawk. Warsh, however, is also son-in-law of Trump’s long-standing friend and billionaire donor Ron Lauder. It is doubtful whether he’d be the president’s pick without having pledged to nudge the Fed’s policy committee towards lower borrowing costs – so the pace of rate cuts could quicken, putting more pressure on the dollar.

In theory, Trump’s tariffs should have bolstered the US currency by reducing imports and improving the US trade balance. But the scale of the measures announced on “Liberation Day” in April 2025 instead contributed heavily to the dollar’s fall in value.

The president’s measures – initially hiking average effective tariffs from 2.5pc to 27pc within a month – sparked market turmoil, including an asset sell-off that pressured the US currency. Direct retaliation from major trading powers including China and the EU further eroded investor confidence and prompted US capital outflows. Trump’s tariffs, while they are less punitive than first announced, have combined with broader macroeconomic concerns – including the rise of America’s debt from 100pc to 125pc of GDP over the last decade – to drive considerable “sell America” outflows to other major currencies.

While the related dollar weakening has aggravated US inflation, a cheaper currency helps US exporters, not least “rust belt” manufacturers that are a priority among Trump’s “Make America Great Again” (MAGA) movement. That’s why many are inclined to think the president wants the dollar to keep on falling.

Trump has fuelled these concerns, pointing to the “great valuation” of the sharply depreciated US currency. There are suspicions the White House initially made its maximalist tariff demands not only as a bargaining ploy, but to strategically devalue the currency. The president’s dollar stance is nuanced – and often contradictory. He values “reserve currency status”, which sees the dollar demanded around the world both for payment transactions and a store of value. That supports the US currency, allowing America to run looser monetary policy without the inflationary impact of a dangerously weak dollar. Nonetheless, Trump has also shown willingness to tolerate and even encourage dollar depreciation for export gains (given his emphasis on appealing to blue-collar workers). Talk of the dollar’s demise, and its loss of reserve currency status, is, without doubt, overdone. The US currency still accounts for about 60pc of global foreign exchange reserves and almost 90pc of global transactions by value, underscoring its entrenched role.

Quite clearly, as the dollar has weakened, certain “safe haven” currencies have gained, with the Swiss franc up 13pc against the dollar during 2025. And despite its recent volatility, gold has soared from around $3,100 to over $4,900 an ounce since April 2025, such has been the impact of Trump’s “shock and awe” tariff announcement and the escalation of geopolitical tensions ever since.

When it comes to pound sterling, and the broader UK economy, a weaker dollar delivers a mixed offering. Benefits in lower import costs and inflation are offset by challenges for exporters, investors, and multinational firms. Since Trump’s second term, the pound has strengthened around 12pc against the dollar, from roughly $1.23 to $1.37. This makes dollar-denominated imports cheaper, reducing costs for US goods and dollar-priced commodities like oil.

And while the UK remains an inflation outlier, with a headline rate of 3.4pc in December, up from 3.2pc the previous month and higher than other G7 nations, domestic price pressure would have been even worse were it not for a falling US currency. Tourists and businesses travelling to, or dealing with, the US have also gained, with pounds stretching further abroad.

Yet the downsides are significant, particularly for UK-based companies with substantial US exposure. British-based exporters to the US have found their goods more expensive in dollar terms, undermining competitiveness and demand – especially amid US tariffs that add further barriers.

Overall, while a weaker dollar has flattered the value of sterling, and helped keep a lid on UK inflation, it has also exposed many of the UK’s structural weaknesses – a trend that looks set to continue.

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Britain, Business, Economic, Government, Legal, Politics, Society

Rights for workers. Reforms will be multi-phased

BRITAIN

BUSINESSES face years of uncertainty as a result of the Government’s phased introduction of major new workers’ rights.

A document published by the Department for Business and Trade admitted letting millions more staff sue their bosses from day one will create “concerns from business” and risks “unwelcome additional work for the tribunal system”.

But the “Next Steps” report also reveals that the landmark Employment Rights Bill is only the first stage of the shake-up, with many more reforms to be introduced later through secondary legislation or codes of practice.

The future burdens on firms include the “right to switch off” which will prevent managers from contacting staff out of office hours.

There will also be a review into the system of parental leave and the introduction of “socioeconomic duty”, which will force public sector bodies to consider the impact of policies on different classes in society, leading to fears the middle class will be squeezed out.

A proposed review of health and safety regulations could lead to staff getting the right to clock off if it gets too hot in their workplaces.

The DBT document says it will look at “how to modernise health and safety guidance with reference to extreme temperatures”. Unions have already called for a maximum of 30C (86F) indoors, or 27C for those doing strenuous work. Under a separate Equality (Race and Disability) Bill due later this year, firms employing more than 250 will have to report on the difference in pay between white and ethnic minority staff.

They will also have to show how they benefit the environment and communities when bidding for work, under plans to “ensure social value is mandatory in contract design”. Over the next few years, bosses will also have to follow the progress of legislation and contribute to public consultations if they want to raise concerns.

Experts within the field of employment law have expressed concerns. With multiple ongoing consultations for various reforms not yet included in this Bill, it remains to be seen if the numerous reforms will trickle into employment law over the course of months, if not years. That in turn may give rise to businesses struggling to keep up with the ever-changing legal position and risk ending up in hot water.

Now that the Employment Rights Bill has been introduced into Parliament, it’s clear what a daunting task employers will face. Much of the detail is still yet to come. Employers will have the opportunity to consult with the Government on the detail such as the length of probation periods, but that is vexed and problematic because they will have to wait longer until they are able to prepare for the detail of reforms yet to be published.  

Others believe that if the right balance is struck then we have the potential to get more people into work and boost economic growth. If the process is mishandled, however, there is a danger these things could have the opposite effect.

And there are concerns that these proposals will ultimately make it riskier and more costly for businesses to employ staff at a time when business confidence is at its lowest point in two years.

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Britain, Business, Economic, Government, Legal, Politics, Society

Employment rights bill

BRITAIN

PRIOR to Labour coming into office, its general election manifesto said the government would introduce its workers’ rights package within its first 100 days. Yesterday, on day 97, it fulfilled that pledge. Parliament will debate the newly published employment rights bill in just over a week’s time. Even so, this is only one stage in a longer workplace reform journey that will take more than one parliamentary session to deal with. Many of the government’s decisions about changes to the world of work remain to be nailed down and are not part of the bill at all.

It has become easy to caricature the new legislation, and many are doing so. The Conservatives dismiss it all as rewards to Labour’s trade union paymasters. The Unite union says the plan is full of gaping holes. The Federation of Small Businesses says the plans are rushed and chaotic. But the British Chambers of Commerce says the government is listening and responsive. What isn’t in question, though, is the level of business fury. A leading legal publication says the package strikes positive notes with lawyers.

With views polarised, this is leading to a sterile, zero-sum debate on work issues. But the larger truth is that this is a bill about change. Employment law has not kept pace with developments in the worlds of work, family, and business. The stark reality is that a fresh approach, centred on the work issues of today and tomorrow rather than those of the past, is long overdue.

Unsurprisingly, then, the employment rights bill is multiple different things, not one simple ideal. The bill is large and wide-ranging. It comes in six discreet sections, containing 119 different clauses and runs to 158 pages. Most of it is about terms and conditions for individual employees, and the obligations that employers will have to follow. The bill also creates a Fair Work Agency to enforce it. Relatively little of it is actually about the law on trade unions at all, though you might not think so to listen to the political debate.

The most important rights in the bill belong to individual workers, and especially to new hires and to families. These include unfair dismissal protection from day one, along with day-one paternity and unpaid parental leave rights. Sick pay will apply from day one as well. Workers on zero-hours contracts will gain guaranteed hours if they want them. Fire and rehire on worse terms will be banned. Flexible working will be a default right.

The bill does not set all these rights in stone. A statutory probation period for new hires is still being discussed, during which greater flexibility would apply. Fire-and-rehire prohibitions may not be applied to businesses at risk of collapse. Small firms, some of which do not have HR departments to navigate these rules, are looking for a more adaptable approach too. It is better to get these issues right than to rush into them.

Some gaps remain. These include the right to switch off outside working hours, as well as a requirement for large employers to report on equalities pay gaps. Some unions want to roll back more of the restrictive legislation from the Conservative years. Nevertheless, the larger reality is that it is important that workforces should be well paid and treated fairly. This matters in terms of economic and employment justice, but also in making businesses more innovative and more productive. On this, at least, the Labour government’s approach is in line with the public mood – and rightly so.

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