Last Week’s Market Movements
Last week brought significant volatility to the currency markets, particularly for Sterling and US Dollar pairs. We observed GBP/EUR rising to 1.2120, GBP/USD climbing to 1.27, and EUR/USD initially reaching 1.05 before retreating to the 1.03 area by Friday.
Two major developments drove these movements. The British Prime Minister’s visit to the White House resulted in confirmation that the US will not impose tariffs on British goods. Conversely, President Trump’s suggestion of a potential 25% tariff on European car imports substantially pressured the EUR/USD exchange rate.
Additionally, weekend meetings between Ukrainian President Zelensky, President Trump, and VP J.D. Vance appeared to yield limited progress. Follow-up discussions with the British PM showed somewhat more promise, though a Ukraine/Russia ceasefire remains elusive. Markets may react to these developments as trading begins on Monday.
This Week’s Important Releases
The current volatility is likely to continue this week with several noteworthy economic releases:
Monday
UK mortgage approvals and BoE consumer credit data will set the tone for Sterling. Mortgage approvals typically serve as a reliable indicator of economic strength—when lending is robust, it generally signals a healthy economy. However, forecasts suggest lower numbers, which could weaken the Pound in early trading.
We’ll also see flash EUR CPI data (expected lower) and US Manufacturing PMI figures (anticipated to decline slightly, potentially reflecting tariff uncertainty).
Wednesday
Services PMI data will provide insight into each region’s largest economic sector:
- European figures are expected weaker
- UK data is forecast to show modest improvement
- US numbers are projected to decline
This combination could support GBP/EUR appreciation. US factory orders (expected positive) and ADP employment change (forecast lower than previous) will round out the day’s significant releases.
Thursday
The ECB interest rate decision takes center stage, with markets anticipating a 25 basis point cut to 2.65%. While generally bearish for the Euro, a less dovish tone regarding future cuts could support a EUR/USD rebound.
Several Fed speeches and US jobless claims will provide additional context for dollar movements.
Friday
The week concludes with Eurozone employment and GDP data, though market reaction will be largely influenced by Thursday’s ECB decision. The key event will be US Non-Farm Payrolls, with a consensus forecast of 133,000 new jobs. Actual figures often diverge significantly from expectations, potentially creating substantial volatility for dollar pairs during afternoon trading.
Implications for Currency Management
This environment presents both challenges and opportunities for businesses managing substantial foreign exchange positions. The expected volatility, particularly surrounding Thursday’s ECB decision and Friday’s employment report, suggests prudent risk management through appropriate hedging strategies may be advisable.
The diverging monetary policy trajectories between the US, UK, and Eurozone will likely continue to drive exchange rate movements in the near term. Working closely with your currency broker to develop appropriate strategies based on your specific exposure is recommended.