Markets React to Renewed US–China Trade Tensions as Pound Weakens on UK Jobs Data

Key Insights:

• Markets keep an eye on the ongoing trade friction between the US and China
• The British pound feels the strain on job numbers

Market Recap:

The US dollar bounced back on Monday, recovering some of its losses from Friday as the Trump administration signalled a willingness to engage in trade discussions with China — helping to ease concerns of renewed tensions.

Comments from Treasury Secretary Bessent confirmed that President Trump and President Xi are still expected to meet in South Korea later this month, which provided a sense of calm across global markets.

Trading activity was subdued with US markets closed, leading to below-average volumes. The Australian dollar saw the most notable move, benefiting from renewed demand after last week’s sharp decline.

Safe-haven currencies such as the yen and Swiss franc lost ground as investors showed a greater appetite for risk. Meanwhile, the euro remained under pressure, with political developments in France drawing attention after President Macron’s cabinet reshuffle aimed at easing domestic tensions and advancing budget plans.

Today's Market Watch:

Tensions between the US and China resurfaced overnight after Beijing imposed new restrictions on the US divisions of Hanwha Ocean, following a US trade probe into China’s maritime industry. In response, Treasury Secretary Scott Bessent accused China of using rare earth exports as an economic weapon, heightening geopolitical uncertainty. The renewed friction left the US dollar slightly softer this morning.

In the UK, labour market data painted a mixed picture. Wage growth slowed to 5.0% year-on-year (4.4% excluding bonuses), below forecasts of 4.8%, while the unemployment rate edged up to 4.8%. Although overall employment increased slightly, a decline of roughly 10,000 in payroll numbers suggests cooling demand for workers and easing wage pressures. Separately, new data from the British Retail Consortium showed that September retail sales grew at a slower pace, adding to signs of softening domestic momentum.

The pound opened weaker, as concerns over the UK’s economic outlook continue to weigh on sentiment ahead of Thursday’s GDP release, which will be closely watched for further direction.

14th October 2025

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