Category Archives: United States

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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Gaza, Israel, Palestine, United Nations, United States

Donald Trump’s Board of Peace

BOARD OF PEACE

Intro: This newly created body was supposed to give Gaza a future, but the US president is using it to attack and undermine the UN, international law, and multilateralism

Just a cursory glance at the logo of the Board of Peace tells you all you need to know. It is the globe and laurels of the UN – only gold, because this is Donald Trump’s initiative, and shows little of the world beyond North America.

The charter of the board, formally launched at the World Economic Forum in Davos just days ago, suggests that this is less America First than Trump Always. It is not “the US president” but Mr Trump himself who is named as chair, for as long as he wishes. He can choose his successor, decide the agenda, and axe whomever he chooses – even if they have down-paid the $1bn demanded for permanent membership. It is the institutional expression of his belief that he is bound not by law but “my own morality, my own mind”.

The body was born and constituted through subterfuge: the UN security council authorised a board of peace chaired by Mr Trump to oversee administration and reconstruction in Gaza. There were misgivings about the colonialist model and the free rein given to the US president, as well as the vagueness of the resolution. A desire to ensure his buy-in to a ceasefire won its passage.

What the US has created is something entirely different. The board’s charter does not mention Gaza once. A man increasingly fixated on landgrabs now heads an “international peace-building body” to replace “failed” institutions. To what extent this is a serious attempt to encroach upon, if not supplant, the UN, versus a symbolic declaration of power and creation of another forum for polishing his ego, is unclear. The early signs indicate that Mr Trump has overplayed his hand again. His claim that Vladimir Putin had joined (Putin disagreed) made it easier for the UK and others to back away from an offer they were not supposed to refuse.

Benjamin Netanyahu, another leader indicted by the International Criminal Court, will sit alongside stakeholders from Belarus, Uzbekistan, and Hungary. Eight Muslim-majority states, including Saudi Arabia, Egypt, and Turkey have together agreed to join. Traditional US allies, however, are conspicuously absent. It remains unclear how others can make themselves heard on Gaza’s future if they rightly shun a deliberate attempt to undermine multilateral institutions. But they must. The already difficult, almost intractable task of winning peace in Gaza and justice for Palestinians has been further compromised. With an executive board – featuring Tony Blair and Mr Trump’s son-in-law Jared Kushner – and a Gaza executive board containing regional officials, Palestinians are relegated to a fourth-tier technocratic committee.

For 2 million Palestinians enduring a brutal winter amid the ruins and ongoing bombardment by the Israeli Defence Force, the presentation of plans for the next 100 days by Palestinian and US officials suggests that the administration has not totally lost interest. Mr Kushner’s ambitious proposals will displease those on the Israeli right who want to displace Palestinians entirely. Increases in aid, the reopening of the Rafah crossing, repairs to essential infrastructure, and the reconstruction of homes and hospitals are all desperately needed. But what will materialise and on what terms?

Mr Trump’s real-estate fixation and desire to be applauded as a peacemaker may be the best hope of keeping him engaged, and reducing Netanyahu’s sway. Nonetheless, the rights of Palestinians are most certainly being treated as an irrelevant detail. That cannot stand. Mr Trump has contempt for international law; others must continue to strive to defend it.

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Britain, Europe, Greenland, NATO, Society, United States

Society as we know it must change if NATO is to survive

SOCIETY

Intro: Western societies have grown comfortable assuming that security, prosperity, and peace are the norm. They are not

The stand-off over Greenland has, for now, been defused. Donald Trump has withdrawn his threats of military action and tariffs. There is now an agreed framework for talks. Europeans, including Britons, should be relieved but not reassured. The deal is not done. More turbulence seems certain to lie ahead. The biggest winners in this disruption are not in Washington, let alone Europe, but in Moscow and Beijing.

For weeks, the world has been transfixed as America threatened a NATO ally over an Arctic territory that many struggle to locate on a map. That might have been “Art of the Deal” pressure and not a determination to be the president who acquired a 51st state, but it will have confirmed for Vladimir Putin and Xi Jinping that Westen unity is brittle, that transactional pressure works, and even old alliances can be destabilised.

The strategic logic for Trump’s agenda is real. The Arctic is no longer a frozen periphery. Climate change is opening new shipping routes and exposing vast mineral deposits. Russia has militarised its northern coastline with submarine bases, icebreakers, and hypersonic missiles. China, despite having no Arctic territory, has declared itself a near-Arctic state and invested heavily in infrastructure and resources. Greenland sits at the intersection of these ambitions and astride the Golden Dome missile defence coverage.

The Arctic has always mattered to Britian. Our defence posture is northern-oriented, shaped by the Cold War imperative of protecting the Atlantic sea lanes to North America. That has not diminished but intensified as undersea energy and data cables have become critical to the modern economy. Our submarine patrols, maritime patrol aircraft, and our commitment to NATO’s northern flank all reflect this reality. The UK Commando Force will be in Norway shortly for their winter deployment – a tangible reminder that, for Britain, the High North is not a distant theatre but increasingly our strategic front line.

Greenland and Canada now sit on that front line too. Mark Carney’s call at the World Economic Forum in Davos for “middle powers” to collaborate more closely was not abstract multiculturalism but a recognition that the post-Cold War security architecture is fracturing. Countries like Britain, Canada, the Nordic nations, and others must build new coalitions. These will require substance – they need capability, capacity, and credibility.

For decades, we have relied on America’s military dominance to underwrite our security. Notwithstanding our sacrifices for American security in Iraq and Afghanistan, that guarantee can longer be assumed. The United States might be unwilling (isolationist sentiment is rising) or even unable to provide it (for example, were a crisis in the Euro-Atlantic to coincide with one in the Pacific). Shorn of its rhetoric, the Trump administration’s recently published national security strategy reflects priorities that any US administration would recognise: homeland security, the western hemisphere, China and the Middle East before the Euro-Atlantic.

Europe has committed to increasing defence expenditure over the next decade. Away from the eastern front line, those commitments are not yet backed by credible capability plans. Fragmentation is an issue. Europe operates 17 types of main battle tank; America has one. We have 20 different fighter jets; they have six. We have 29 classes of destroyers and frigates; they have four. Every variant means separate supply chains, training regimes, and maintenance.

Integration is not just about efficiency but credibility. An alliance that cannot operate as a coherent force will not deter a determined adversary. Putin has watched European defence debates for years and calculated – correctly so far – that we lack the collective will to match our rhetoric. European NATO must therefore accelerate defence investment, military interoperability, and defence industrial integration. Not as an alternative to NATO, but to reinforce NATO.

Political leaders must educate voters about the world we now inhabit. Western cohesion is brittle. The post-Cold War peace dividend has been spent. The threats are real and growing and the choices are hard: Europe spends 10-times more on welfare than on defence. No modern politician has dared echo John Kennedy’s “Ask not what your country can do for you. Ask what you can do for your country”. Someone will have to try.

These choices are not just about bigger budgets, they demand a broader reshaping of national resilience: how we protect critical infrastructure, secure supply chains, educate engineers and strategists, and prepare communities for disruption. During the Cold War, civil defence was a shared civic responsibility. We need a modern equivalent – not bunkers and drills but resilient energy systems, domestic manufacturing capacity, cyber literacy, and a citizenry that understands the strategic environment and can respond to crises from floods to hybrid warfare.

This isn’t about sacrifice. It’s about engagement. Higher educational establishments must train the technical talent and conduct the research that underpins resilience. Businesses must rebuild strategic capabilities. Local authorities must prepare for infrastructure disruption. And citizens must understand that security is not something government provides while we go about our lives – it is something we build together.

Darwin saw that it is not the strongest or smartest who survive but the most adaptable. The West has grown comfortable assuming that security, prosperity, and peace are the norm. They are not. They require constant effort. The Greenland episode has been a crisis. It must now become a catalyst. Europe has had its wake-up call.

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