It’s been yet another volatile week in the FX markets, largely driven by ongoing uncertainty around President Trump’s tariffs. While Sterling managed to hold firm against the U.S. Dollar, briefly touching highs around 1.31, the Pound struggled significantly against the Euro, hitting fresh lows near 1.1440—a decline of around 5% in just two weeks.
The recent Euro strength primarily stems from investors rapidly shifting funds out of U.S. Treasuries and into European Bunds, causing the EUR/USD pair to surge sharply to around 1.14. This kind of sudden market shift highlights the critical importance of having a clear strategy in place for managing currency exposure. If you’re finding the current market conditions challenging to navigate, please don’t hesitate to reach out—I’m here to help.
This coming week is a shorter four-day trading week in the UK, but there will be no shortage of market-moving events. Over the weekend, there were significant amendments to Trump’s tariff policies, including a 90-day delay on certain tariffs and notable exemptions—particularly on key products like microchips. These changes could lead to a positive market sentiment and a potentially strong opening for equities on Monday.
Monday itself is relatively quiet from a data perspective, but traders will closely monitor headlines coming from the White House, as well as afternoon speeches by Federal Reserve officials, which could inject some volatility into currency markets.
On Tuesday, attention shifts to UK employment data and average earnings figures. Expectations suggest both lower employment levels and lower average earnings in the UK. Given the current economic climate and the recent taxation adjustments, this could weigh negatively on the Pound, potentially leading to lower exchange rates. Shortly afterwards, Eurozone industrial production and the ZEW Economic Sentiment Index will be released, both anticipated to be weaker compared to last month, possibly halting the Euro’s recent rally.
Wednesday brings important UK inflation figures, expected to fall slightly to around 2.7%. While on the surface this would be positive news, markets might remain cautious, given analysts still predict a resurgence in inflation later this year. Nonetheless, a temporary inflation dip could provide the Bank of England with justification for a rate cut in the coming months—possibly even at their next meeting.
Later on Wednesday, there is a heavy U.S. economic data schedule, including retail sales, industrial and manufacturing production, alongside an important speech from Fed Chair Jerome Powell. Given recent turbulence in U.S. markets, any hint from Powell about future monetary policy could cause significant market moves. The day also includes the Bank of Canada’s interest rate decision, widely expected to remain unchanged at 2.75%, but the accompanying commentary will still be closely scrutinised for hints of future policy moves.
With another potentially volatile week ahead, staying proactive with your FX strategy is crucial. If you have upcoming currency requirements or need further insights, please feel free to contact me.