After a turbulent week filled with interest rate decisions and heightened uncertainty surrounding global trade, markets braced themselves for further volatility heading into the weekend, with high-stakes U.S.-China negotiations taking place in Geneva. Fortunately, on Sunday evening, the White House announced encouraging news—a preliminary framework for trade negotiations has been reached between the two economic powerhouses.
While the full details of this agreement will only be unveiled on Monday, the fact that both sides have established a foundation for productive talks is undoubtedly positive. This preliminary agreement significantly reduces immediate fears of escalating tariffs and prolonged economic uncertainty. Markets are expected to respond positively initially, although, as always, investors will be carefully scrutinizing the fine print. The exact nature of this agreement could still trigger volatility—particularly if the specifics disappoint or if the deal appears less robust than anticipated.
As we saw during President Trump’s first term, negotiations between the U.S. and China are rarely straightforward, so market participants should remain prepared for twists and turns ahead. Expect tariff announcements and detailed trade discussions to continue driving short-term volatility, even as we welcome this initial step forward.
Key Economic Data This Week
Aside from the focus on tariffs and trade, it’s relatively quiet on the economic data front this week, though there are a few notable releases:
Monday is completely data-free, meaning markets will focus heavily on any further details emerging from the U.S.-China negotiations.
On Tuesday, we’ll see the UK Labour Market Report, which is expected to reveal a rise in unemployment to around 4.5%. This could add pressure to Sterling, especially if combined with ongoing economic uncertainty within the UK. Later, Germany releases its ZEW economic surveys, with forecasts predicting a marked improvement from –14.0 to +10. While this improvement is a positive sign for the Eurozone’s largest economy, survey data alone rarely triggers significant market moves, especially given the broader economic weakness across Europe.
In the U.S., CPI (Consumer Price Index) inflation data is expected to remain stable at 2.4%. Unless inflation surprises significantly, this release is unlikely to have a substantial impact on the Dollar.
On Wednesday, the calendar remains quiet, with German CPI data anticipated to be unrevised at 2.1%, suggesting limited market reaction.
Thursday will be the busiest day this week from a data perspective. UK GDP numbers are forecasted to show growth improving to 0.6%, a figure that could support Sterling and provide a welcome boost after recent volatility. Shortly after, Eurozone GDP data is expected unchanged at 0.4%. Given the UK’s stronger growth forecast, Thursday might present an attractive opportunity for GBPEUR buyers.
Later, the U.S. will release retail sales data, expected to weaken slightly due to recent declines in consumer confidence. Jobless claims are also forecast to rise, another potential negative for the U.S. Dollar, which could weigh on sentiment going into the latter part of the week.
Finally, on Friday, attention will shift to Japan’s GDP release, anticipated to be weaker than previously reported, potentially affecting JPY pairs. The afternoon will feature several U.S. releases, including housing starts, building permits, and the University of Michigan Consumer Sentiment report. Given recent economic conditions and consumer sentiment concerns, these reports may further influence the Dollar’s short-term direction.
With this backdrop, market participants need to remain attentive and prepared for continued volatility. As always, if you require assistance or advice in navigating these challenging conditions, please reach out—I’m here to help.