As I write this, news has just broken that the EU and the US have secured a crucial trade agreement, just in the nick of time. To summarise the key points quickly, the EU has agreed to buy approximately €750 billion worth of energy and around €600 billion of U.S. investments, alongside establishing a 15% tariff across the board, notably including automobiles.
This news is extremely positive for markets, as uncertainty over the US-EU trade relationship had become a significant concern for investors. With this risk now lifted, and the US-China tariff deadline recently postponed—markets are likely to embrace a strong “risk-on” stance.
I anticipate the Euro to open higher on the back of this news, providing potential gains for EURUSD traders and possibly further pressuring GBPEUR. The GBPEUR rate has been under pressure for some time and has recently slipped below the key 1.15 level. Given the current positivity from Europe relative to the UK, there’s a growing likelihood we could soon test levels closer to 1.13. Businesses and individuals needing to buy Euros may therefore want to consider acting sooner rather than later to mitigate potential further downside.
Key Economic Releases and Events This Week
Even with the significant trade news already moving markets, we still have a full slate of important economic data to watch closely:
Monday: Markets React to US-EU Trade Deal
Monday will likely see the full market reaction to the newly agreed US-EU trade deal. As mentioned, expect the Euro to gain strength against Sterling and the US Dollar initially. The improved sentiment towards Europe should also help broader European assets.
Tuesday: US Consumer Confidence
Tuesday brings US Consumer Confidence data, forecasted slightly higher at 96 compared to last month’s 93. A rise in consumer confidence would indicate continued strength in the US economy, potentially lending additional support to the US Dollar.
Wednesday: Eurozone GDP, US ADP Employment, and FOMC Rate Decision
Wednesday is packed with critical releases. Eurozone GDP is expected to drop to 0%, reflecting ongoing challenges in achieving sustained growth across the bloc. This weaker GDP figure may temporarily dampen enthusiasm for the Euro following Monday’s expected gains.
Meanwhile, the US will release the ADP employment report, forecasted to show an addition of 80,000 jobs; a solid improvement that could bolster the Dollar if confirmed.
In the evening, the FOMC announces their interest rate decision. The Federal Reserve is widely expected to keep rates unchanged this month. Now that the trade tariff picture has become clearer, the Fed will likely maintain its cautious approach, deferring any potential rate cuts until at least the September meeting. Markets will closely monitor Chair Jerome Powell’s comments for clues about the Fed’s future monetary policy intentions.
Thursday: Bank of Japan Decision and Eurozone Unemployment
On Thursday, the Bank of Japan (BoJ) holds its policy meeting. While no immediate rate change is expected, analysts anticipate that the BoJ may signal a possible hike later this year as inflation pressures build.
Additionally, Eurozone unemployment data is expected to remain steady at 6.3%, indicating stability in the European job market. While stable employment data usually has limited immediate market impact, this number provides important context for future ECB policy decisions.
Friday: Manufacturing PMIs and U.S. Non-Farm Payrolls (NFP)
Closing out the week, Friday sees the release of manufacturing PMI figures from both the Eurozone and the UK. Both are expected to remain unchanged from previous readings, likely causing minimal market disruption unless significant surprises occur.
However, the main event on Friday will be the US Non-Farm Payroll (NFP) report, expected to show a healthy 100,000 jobs added. Recent NFP reports have been somewhat unreliable, with initial positive figures later revised downward. Traders should therefore exercise caution, closely monitoring revisions alongside the initial release.
Conclusion:
This week’s US-EU trade deal has provided a timely boost to markets, significantly reducing near-term geopolitical uncertainty. However, with multiple influential economic indicators and central bank events still ahead, traders should remain proactive and vigilant in managing their currency strategies.
As always, if you have questions or need assistance navigating these market developments, please don’t hesitate to reach out—I’m here to help.
GBP/EUR 1.1512 GBP/USD 1.3420 GBP/AED 4.9322
GBP/AUD 2.0562 GBP/CHF 1.0747 GBP/CAD 1.8417
GBP/NZD 2.2446 EUR/USD 1.1646 GBP/ZAR 23.9810