The weekend has already delivered plenty for markets to digest, with renewed volatility driven by geopolitics rather than economic data. The most notable development has been President Trump’s announcement of proposed tariffs on a group of European countries, a move that has introduced fresh uncertainty into global trade relations and raised concerns across financial markets ahead of the new trading week.
President Trump confirmed that the United States intends to impose a 10% tariff on goods from several European nations from February 2026, with the potential for these tariffs to rise to 25% later in the year if negotiations fail to progress. Countries referenced include Denmark, Germany, France, the United Kingdom and several Nordic states. The announcement has been framed by the White House as part of a broader dispute linked to Greenland and Arctic security, although European governments have firmly rejected this rationale.
European leaders responded swiftly over the weekend, issuing joint statements condemning the tariff threat and reaffirming support for Denmark and Greenland’s sovereignty. From a market perspective, the concern is not the tariffs themselves, which are still some distance away, but the precedent and escalation risk they represent. Trade uncertainty between major allies has a habit of weighing on business confidence, investment decisions and risk appetite long before any tariffs actually come into force.
Early market indicators suggest a cautious start to the week, with European equities expected to open lower and safe-haven assets such as gold remaining well supported. Currency markets are also likely to stay sensitive to headlines, particularly EURUSD and GBPEUR, as traders reassess political risk in Europe versus the United States.
Economic Data: A Busy Week Ahead
Beyond geopolitics, the coming week is also active from a macroeconomic standpoint.
Monday is quiet from a US perspective due to the public holiday, leaving Eurozone CPI as the main release. Inflation is expected to remain unchanged at 2%, exactly in line with the European Central Bank’s target. A steady reading would support the ECB’s current cautious stance on future rate cuts.
Tuesday brings the UK labour market report, where unemployment is expected to edge lower toward 5%, while average weekly earnings are forecast to soften slightly. These two forces may largely offset each other for Sterling, although any surprise deviation could trigger volatility. Germany’s ZEW economic sentiment survey is also due and is expected to improve, which would be supportive for the Euro if confirmed.
Wednesday’s focus shifts to UK inflation, with headline CPI expected to tick higher to 3.3%. While this remains well above target, it reinforces the idea that the Bank of England may need to remain cautious on further rate cuts. In the US, attention will also turn to a Supreme Court hearing related to Federal Reserve governance, which may generate some market noise, even if no immediate policy implications are expected.
Thursday sees US GDP, expected to remain unrevised at 4.3%, alongside weekly jobless claims. Strong growth data continues to support the US economy, although labour market indicators will be watched closely for any signs of cooling.
The week closes on Friday with the Bank of Japan rate decision, where no change is expected, followed by UK retail sales and flash PMI data for both the UK and Eurozone. These surveys could prove important in shaping near-term sentiment as markets head into the next phase of central bank decision-making.
Final Thoughts
While last week’s volatility was driven largely by political headlines, this week brings a combination of trade uncertainty and key economic releases, keeping markets finely balanced. Until there is greater clarity on US-Europe trade relations, currency and equity markets are likely to remain headline-driven, with investors favouring caution over conviction.
For businesses and investors with FX exposure, this remains an environment where planning, flexibility and risk management are more important than ever.
GBP/EUR 1.1517 GBP/USD 1.3383 GBP/AED 4.9181
GBP/AUD 2.0001 GBP/CHF 1.0703 GBP/CAD 1.8594
GBP/NZD 2.3192 EUR/USD 1.1604 GBP/ZAR 22.0386