Weekly Round-Up & The Week Ahead

Weekly round-up and a look at the week ahead for EUR, GBP, and USD.

DAILY ANALYSIS

USD

The Trump administration continues to dominate global markets as Treasury secretary Scott Bessent confirmed the US have made ‘substantial progress’ over the two-day trade talks with Beijing held in Switzerland. The two superpowers have agreed major reductions in tariffs for 90 days – the US will reduce duties on Chinese goods to 30% from 145% whilst China will cut tariffs to 10% from 125%. Bessent also announced there is a real possibility of a purchase agreement between the two countries. ‘Liberation day’ has sent markets into a state of uncertainty since being imposed, however the trade deal with the UK last week, coupled with this morning’s announcement, does show promising signs normalcy may be a lot closer than anticipated. The Federal Reserve meeting last week has now been somewhat overshadowed by the weekends revelations, despite President Trump being vocal on his opinion Fed Chair Jay Powell isn’t reacting fast enough to cut interest rates, the FOMC voted to leave rates unchanged at 4.50%.

Given the start of the week, it’s likely the dollar will be driven by the political landscape as we’ve seen the US dollar spot index reach 4-week highs this morning. Growth in the US has been a concern since the tariffs came into effect with Stagflation returning to the conversation, although it’s still too soon to view the impact of the tariffs on the US economy, analyst will be keen to view the latest inflation figures for April – MoM forecast at 0.3% from 0.1% previous.

GBP

Prime Minister Sir Keir Starmer thrust the UK into the spotlight last week as he managed to secure the first trade deal with the US since the Trump tariffs were announced. Although the deal needed more than a few details ironing out, it displayed both sides intentions and appears to have put the UK in positive standing with the ever-volatile Trump administration. The Bank of England delivered their latest interest rate decision last Thursday, it was widely expected the MPC would vote to cut interest rates by 0.25% to 4.25% which did come to fruition. However, the surprise came when two members voted to leave rates unchanged, a hawkish decision which wrong footed economists. BoE governor Andrew Bailey then commented the trade deal with the US is ‘good news’ but did warn ultimately the ‘it will leave the tariff rate higher than it was’ and to bear that in mind when looking at the UK economic outlook.

Sterling may be another benefactor of the US/China progress as investors move out of the single currency and into the pound. President Trump commented the UK have moved themselves to the front of the queue in terms of trade deals which shines a positive light on the UK in what has been a dim period. Key highlights for a heavy week data wise includes, Average Earnings data, ILO Unemployment, GDP, Industrial Production and Manufacturing Production.

EUR

A recent injection in Eurozone confidence has been dented by the US willingness for trade talks and both investors/analysts will be looking at the EU for their next move. Germany’s new Chancellor Friedrich Merz got off to a rocky start last week as he failed to achieve the necessary votes in his fist investiture vote, Germany have been embroiled in political uncertainty for years now and the incoming Chancellor was mean to signal a fresh start for strong leadership not only in German but Europe as the largest contributor. On the second time of asking, Merz managed to gather the required votes however the shaky start isn’t what the bloc needed whilst putting on a unified front in the trade battle with the US.

The single currency is under fire this morning as the Euro depreciates against both its G3 counterparts, with minimal data out of the Eurozone today the downward momentum could put a further dent in the currency. EU data filters in throughout the week, German/EU ZEW Survey, German CPI data for April, GDP, Industrial Production and a host of speeches from ECB members..

Daily Rates

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