Economic Uncertainty and Foreign Exchange Volatility

International trade and global shipping has long been shaped by the ebb and flow of economic indicators, currency movements, and policy decisions. But in recent weeks, this interplay has intensified, with significant implications for importers and exporters.

While President Trump’s new trade tariffs have been dominating logistics headlines, attention has shifted to currency markets, where the strength or weakness of key currencies can influence freight costs, shipping routes, and overall competitiveness.

The US dollar’s recent slump to a three-year low against the euro is counter to typical market behaviour. In times of global financial stress, investors usually flock to dollar-denominated assets such as US Treasury bonds, reinforcing the dollar’s strength. But this time, the opposite is happening.

This trend reflects growing uncertainty around US policy, particularly in light of recent comments from Trump’s economic advisers, who argue that the dollar’s reserve status has undermined US manufacturing. There is concern that efforts to weaken the dollar could be revived, with significant consequences for global trade and logistics.

In response to the mounting challenges, the UK Government has taken steps to support British businesses. UK Export Finance (UKEF) has received a £20 billion boost to its lending capacity – now totalling £80 billion – with up to £10 billion set aside to assist those most affected by the US tariffs in the short term. Small and medium-sized businesses will also have access to loans of up to £2 million, providing vital financial headroom to help navigate increased costs and currency volatility.

This Thursday, the European Central Bank (ECB) is due to announce its latest interest rate decision and with inflation figures lower than expected – partly due to the economic impact of new US tariffs – analysts are speculating on an interest rate cut, with the Bank of England expected to follow suit in May in moves which may weaken the euro and pound.

Many freight charges – especially for ocean and air cargo – are priced in US dollars and a weaker dollar can reduce shipping costs. However, the downside is increased volatility, which complicates budgeting and contract negotiations.

Foreign Exchange Snapshots: USD, AUD, EUR

• USD (US Dollar): Political developments and shifting trade policies have shaken the dollar. A notable shift in foreign direct investment away from China towards nations like Mexico, India, and Vietnam, so-called “friend-shoring”, reflects broader geopolitical realignments that are reshaping global logistics flows.
• AUD (Australian Dollar): The AUD’s recent movements have mirrored broader market trends, often inversely correlated with the USD. Rising commodity prices and speculation over Reserve Bank of Australia interest rate decisions have driven AUD volatility. For logistics operators trading in the Asia-Pacific region, the AUD remains a currency to watch.
• EUR (Euro): Europe’s energy dynamics continue to weigh on the euro. As energy imports shift and prices fluctuate, the EUR has responded in kind. The ECB’s monetary policy actions, particularly Thursday’s decision, could provide more clarity and potentially stability for euro-denominated trade.

Currency fluctuations, interest rate changes, and policy uncertainty all impact costs, demand, and delivery schedules. Businesses that invest in data-driven planning, real-time risk assessment, and flexible supply chain strategies will be best placed to weather the volatility ahead.

As the global economy navigates another complex chapter Metro will keep goods moving and supply chains protected, regardless of the challenges ahead.

Navigating the complexities of international trade requires real-time insights and expert guidance. At Metro, we continuously monitor market influences, including currency fluctuations, macroeconomic trends, and evolving regulations, to help you de-risk your supply chain and maximise opportunities.

Make informed decisions with Metro’s strategic support. For trade insights and risk management advice. EMAIL Laurence Burford, Chief Financial Officer.