The pound dipped nearly 0.2% against the dollar (GBPUSD=X) to trade at $1.3519 on Tuesday, after the Organisation of Economic Cooperation and Development (OECD) cut its forecasts for growth in 2025 and 2026.
The OECD warned that the economic outlook was becoming “increasingly challenging” and predicted that that global gross domestic product (GDP) growth will slow from 3.3% in 2024 to 2.9% this year and in 2026.
The organisation said that was based on the “on the technical assumption that tariff rates as of mid-May are sustained despite ongoing legal challenges.”
“The slowdown is concentrated in the United States, Canada and Mexico, with China and other economies expected to see smaller downward adjustments,” it said.
For the UK, the OECD lowered it economic growth forecast to 1.3% this year, from the 1.4% it predicted in March. It expected growth to slow further in 2026 to 1%, which was also lower than a previous forecast of 1.2%.
Russ Mould, investment director at AJ Bell (AJB.L), said that while the OECD's global growth forecast cut was “only a small revision … it’s still enough to cause investors some digestion as they consume their morning news.”
“The 90-day pause on tariffs has just over a month before expiration, meaning the pressure is on countries to do deals with the Trump administration,” he said. “Reports suggest that [US president Donald] Trump wants best offers on trade negotiations by Wednesday, perhaps to avoid any last-minute rush or stalemate situations.”
Read more: FTSE 100 LIVE: Stocks head lower as global growth set to slow this year amid Trump tariffs
On Monday, China hit back at Trump's claim it had violated the temporary trade agreement between the two countries, while the EU said it opposed the president's doubling of tariffs on steel and aluminium imports.
The dollar index (DX-Y.NYB), which pits the greenback against a basket of global currencies, ticked up 0.2% at 98.91. It has lost about 0.9% over the past five sessions.
Markets have endured wild swings since Trump unveiled sweeping global tariffs in April. Last week, a new source of uncertainty over his trade policy emerged when a federal appeals court quickly paused a ruling that would have blocked most of the president's tariffs as illegal. The Trump administration is due to respond to the appeals court by Monday 9 June.
Sterling was slightly higher against the euro (GBPEUR=X), meanwhile, hitting the €1.184 mark ahead of the eurozone's fresh flash inflation reading and interest rate decision later in the week.
