The US dollar has dropped to a three-year low following intensified attacks by Donald Trump on Federal Reserve chair Jerome Powell and sweeping tariff announcements. The greenback’s slump has sent shockwaves through financial markets, while gold surged past $3,500 per ounce as investors rushed to safe-haven assets.

The sudden drop in the dollar triggered a cascade of consequences. Currency risk management firm Argentex suspended trading of its shares after a wave of margin calls on its foreign exchange contracts hit its liquidity. In a statement, the company cited “significant volatility in foreign exchange rates” in April that had a “rapid and significant impact” on its short-term financial position.

The volatility also rattled investor confidence more broadly. According to investment platform Hargreaves Lansdown, its clients reported a 35% decline in confidence in North American markets and a 28% drop in the UK. Expectations for UK economic growth were even more severely hit, falling by 43%.

UK Stands Aside from Tariff Battle

Bank of England policymaker Megan Greene weighed in on the broader implications of Trump’s trade policies, telling Bloomberg TV that the tariffs may present a disinflationary rather than an inflationary risk to the UK. She noted that as Britain has not responded with its own tariffs, it could benefit from cheaper imports from Asia and the EU.

“I think the tariffs actually represent more of a disinflationary risk than an inflationary risk,” Greene said, adding that she remains cautious due to concerns over supply-side constraints and persistent inflation in the UK’s services sector.

Greene’s comments reflect a nuanced take on the potential ripple effects of US policy, as central banks globally monitor whether supply chains and price pressures will be reshaped in the months ahead.

Pound Rallies Amid Dollar Weakness

Amid the turbulence, the British pound has continued its strong performance, now on track for its longest winning streak against the US dollar since 1971. Sterling has gained around six cents since early April, marking ten consecutive days of gains.

The dollar’s decline has been attributed to a mix of aggressive fiscal tightening in Washington, uncertainty over Federal Reserve policy, and growing unease about US trade strategy under Trump. With additional tariffs looming and the president threatening further action in the tech and semiconductor sectors, investors appear to be preparing for a prolonged period of currency and commodity volatility.

Global Central Banks on Alert
In response to the dollar’s sharp decline and the resulting surge in gold prices, central banks around the world are closely reevaluating their monetary strategies. The European Central Bank has hinted at a possible slowdown in rate hikes, citing fears of capital inflows destabilizing the eurozone’s fragile recovery. Meanwhile, the Bank of Japan signaled its intent to intervene in currency markets if the yen continues to strengthen against the dollar, warning that excessive appreciation could hurt its export-heavy economy. Analysts suggest we could see a coordinated policy response if market dislocations worsen in the coming weeks.

Commodities and Emerging Markets Feel the Heat
The fallout from the dollar’s slump is also rippling through global commodities and emerging markets. Oil prices have climbed to their highest level this year, partially fueled by a weaker dollar and fears that Trump’s trade moves could disrupt global supply chains. In emerging markets, currencies from Brazil to South Africa have suffered steep losses, with central banks in both countries reportedly considering emergency rate hikes to stem capital flight. Market watchers warn that if gold prices remain elevated and the dollar continues its descent, smaller economies reliant on dollar-denominated debt could face severe financial strain.