Last week was notably turbulent for currency markets, driven largely by President Trump’s recent tariff announcements, the Federal Reserve’s policy decision, and weaker-than-expected U.S. jobs numbers on Friday.
President Trump’s renewed tariff threats and announcements over the past five days have significantly increased market volatility. Initially, these threats led investors to flee riskier assets, strengthening the Dollar and causing EURUSD to tumble sharply from 1.18 down to lows near 1.14, while GBPUSD dropped around 3% in a matter of days. However, later in the week, the Federal Reserve’s decision to keep interest rates on hold, coupled with disappointing Non-Farm Payroll (NFP) figures on Friday, which showed fewer jobs added than expected, changed sentiment dramatically. These factors indicate that rate cuts by the Fed may become necessary sooner rather than later, significantly weakening the U.S. Dollar by the end of the week. By Friday’s close, EURUSD had recovered to approximately 1.16, and GBPUSD rebounded to settle around 1.3270.
This coming week could see continued volatility, albeit with a quieter economic data calendar. Instead, markets are likely to be influenced heavily by ongoing trade talks and tariff-related headlines, as negotiations between the U.S. and various global trading partners continue.
Economic Calendar Highlights This Week:
Monday: Quiet Data Day, U.S. Factory Orders to Reflect Tariff Impact
Monday sees limited data releases, with Swiss CPI expected to remain unchanged at 0.1%, unlikely to impact markets significantly. More notably, U.S. factory orders are anticipated to decline sharply, down to -4.8%. This substantial drop likely reflects recent tariff tensions, suggesting manufacturers and importers are hesitant to commit to new orders amid ongoing trade uncertainty. A weak reading here could further undermine the Dollar’s recent recovery.
Tuesday: Services PMI and Eurozone PPI Data
On Tuesday, services PMI figures from the Eurozone, UK, and the U.S. are released. Expectations are modest, with only the U.S. forecasted to show clear improvement, potentially lending temporary support to the Dollar. In Europe, Eurozone Producer Price Index (PPI) data is due, expected to rise to 0.6%, indicating stronger pricing pressures at the producer level, though this is likely to have only a limited immediate impact on the Euro.
Wednesday: Eurozone Retail Sales
Wednesday brings Eurozone retail sales, expected to improve slightly to 0.3%. While a small uptick is anticipated, the data is unlikely to significantly move markets unless a surprise occurs, but a positive number would at least suggest resilience in European consumer confidence.
Thursday: Bank of England Interest Rate Decision
Thursday’s main event is the Bank of England’s (BoE) interest rate announcement. Markets widely anticipate a 25 basis-point rate cut, bringing rates down to 4%. Typically, a rate reduction leads to currency weakness; thus, Sterling may come under additional selling pressure on Thursday. The Pound’s reaction will largely depend on the BoE’s forward guidance, specifically, any indication of further rate cuts in the near future could amplify downside pressure on GBPUSD and GBPEUR.
Navigating the Week Ahead
Traders and businesses must remain vigilant this week. Although economic releases may appear quieter than recent weeks, tariff-related announcements, central bank decisions, and changing Fed expectations could still trigger significant market moves. Effective risk management and clear currency strategies remain crucial.
GBP/EUR 1.1477 GBP/USD 1.3275 GBP/AED 4.8772
GBP/AUD 2.0492 GBP/CHF 1.0734 GBP/CAD 1.8301
GBP/NZD 2.2462 EUR/USD 1.1555 GBP/ZAR 23.9117