Tariff refunds, “peak pound” fears, and uneven growth: markets brace for May’s policy test

In Q1 2026, private payroll employment in the United States showed near-stability, with the latest Insee-reported figure at -0.1% for private payroll employment. In parallel, Reuters reporting suggests US growth likely picked up in the first quarter, even as consumer spending probably cooled, pointing to a split between headline momentum and household demand. Bloomberg cited Citigroup’s Johanna Chua saying recent US activity data has been “fairly resilient,” while noting an easing-bias debate inside the Federal Reserve with “three dissenters,” signaling policy uncertainty rather than a clean pivot. Separately, the UK’s SIG warned of a first-half profit fall as a construction slump drags performance, reinforcing a domestic growth drag that could complicate any “peak pound” narrative. Geopolitically, the most direct policy lever in this cluster is the tariff regime: the US says the first refunds from Trump tariffs are expected around May 11, which implies an administrative rollout that can quickly change effective trade costs and business sentiment. That matters because tariff implementation and refund timing can shift bargaining power and supply-chain decisions across sectors, effectively acting like a near-term fiscal transfer to importers while still keeping the broader tariff threat alive. In the UK, “peak pound” may be over as multiple risks mount for UK markets, and this framing typically aligns with concerns about inflation persistence, fiscal credibility, and external vulnerability to global risk-off moves. Financial institutions are already reading the macro mix—resilient activity but cooling consumption and internal Fed dissent—as a sign that policy may remain data-dependent, which increases volatility in FX and rates. Market and economic implications are likely to concentrate in FX, rates, and trade-sensitive equities. If US activity is resilient but consumption cools, money markets may keep pricing a cautious path for Fed easing, supporting the front end’s volatility and influencing USD funding conditions; the “three dissenters” detail suggests the easing bias is not unanimous, which can widen the range of outcomes for Treasury yields. The UK-specific signals—SIG’s profit warning tied to construction weakness and “peak pound” doubts—raise the probability of renewed GBP sensitivity to global risk appetite and UK inflation/rate expectations. For equities, construction-linked and discretionary retail exposure could face downside, while banks and trading desks may see mixed effects: SocGen’s retail revival is helping Q1 profit even as trading revenue slides, a reminder that market-making and client activity are not moving in lockstep. What to watch next is a tight sequence around May policy and macro prints. The first refunds from Trump tariffs expected around May 11 are a clear trigger: monitor refund volumes, eligibility rules, and any accompanying guidance that could accelerate or delay relief, as that will affect near-term earnings expectations for import-heavy firms. On the US side, track consumption proxies—retail sales, real income trends, and credit conditions—because the Reuters split between stronger growth and cooling spending is the key risk to the “soft landing” narrative. For the UK, watch construction indicators and SIG’s forward commentary for confirmation that the slump is stabilizing or worsening, and treat “peak pound” as a volatility regime question rather than a settled view. Escalation or de-escalation will likely hinge on whether tariff-related relief broadens and whether Fed dissent narrows into a more coherent easing consensus by the next major meeting cycle.

Geopolitical Implications

• 01

  Tariff refund timing can shift trade leverage and supply-chain decisions without removing the broader tariff threat.

• 02

  USD and rates volatility driven by Fed dissent can amplify cross-border capital flows and risk appetite.

• 03

  UK domestic weakness in construction can reduce policy flexibility and increase sensitivity to global shocks.

Key Signals

• —Refund volumes and eligibility rules around May 11.
• —Consumption indicators to validate or challenge the cooling-spending narrative.
• —Fed communication for convergence or persistence of dissent.
• —UK construction leading indicators and SIG’s forward guidance.