The markets endured yet another week of heightened volatility, driven primarily by escalating geopolitical tensions. After weeks of speculation, President Trump ordered anticipated military strikes targeting Iranian nuclear facilities, confirming direct U.S. involvement in the ongoing Middle East conflict.
Over the past two weeks, investors and analysts have been debating whether the U.S. would become actively engaged, and now the uncertainty has lifted, replaced by fresh concerns about the conflict’s duration and implications. It’s well known that the Republican party is reluctant to support prolonged military engagement; thus, it’s likely the President will seek a rapid conclusion to avoid derailing domestic political objectives. Nonetheless, developments from this conflict will dominate news headlines and significantly influence market sentiment for the foreseeable future.
Alongside these geopolitical pressures, July’s tariff deadlines loom, further complicating the economic landscape. Negotiations on trade deals remain crucial, yet the current global tensions may hinder meaningful progress. Traders should therefore brace for a continuation of headline-driven volatility, especially impacting commodities, currencies, and equity markets.
Economic Data Highlights This Week
Monday: Flash PMIs in Focus
The week begins with key flash PMI figures from Europe, the UK, and the U.S. Eurozone PMIs are expected to show improvement, alongside stronger readings from the UK, reflecting a positive outlook for both the Pound and the Euro. In contrast, the U.S. flash PMI is anticipated to come in weaker, signalling potential economic headwinds. However, despite soft U.S. data, increased geopolitical tensions might prompt investors to seek safe-haven assets, thereby offering short-term support for the Dollar. Traders should approach Monday cautiously, mindful of the interplay between economic data and risk sentiment driven by global events.
Tuesday: German Confidence and U.S. Consumer Sentiment
On Tuesday, Germany releases the closely watched IFO business sentiment surveys, with forecasts suggesting an improvement from last month’s figures. A stronger reading could offer additional support to the Euro and provide some reassurance about Europe’s largest economy.
Later in the day, attention shifts to the U.S., where the Conference Board’s Consumer Confidence data is due, expected to come in higher than May’s reading. Rising consumer confidence typically boosts the Dollar by indicating resilience among U.S. consumers despite geopolitical uncertainties. A positive figure here could provide some relief to the Dollar after potentially weak PMI data on Monday.
Wednesday: Australian Inflation and U.S. Housing Data
Wednesday starts with Australian CPI data, anticipated to show inflation easing to 2.3%. A softer inflation print could weaken the Australian Dollar, particularly if markets view it as increasing the likelihood of further rate cuts by the Reserve Bank of Australia.
In the U.S., new home sales data will be closely scrutinised, expected to show a slowdown to 693k units. This could signal moderation in the U.S. housing market, raising concerns about broader economic growth, potentially adding downward pressure to the Dollar.
Thursday: Key U.S. Economic Indicators
Thursday features a busy schedule for U.S. data releases. It begins with the final U.S. GDP figure for the recent quarter, expected unrevised at a contraction of -0.2%. Confirmation of negative growth would underscore economic fragility and likely exert additional pressure on the Dollar.
However, the picture could be mixed as durable goods orders are expected to improve, signalling resilience in business investment. Jobless claims data is forecasted to remain stable, reflecting ongoing labour market strength. Traders should anticipate volatility around these releases, given their potential to influence Federal Reserve policy expectations and market sentiment towards the U.S. economy.
Navigating Continued Volatility
This week, investors and businesses must remain vigilant. Geopolitical developments, particularly the unfolding situation in the Middle East, could overshadow even critical economic indicators. As always, maintaining clear currency strategies and proactively managing risk will be key to successfully navigating these turbulent market conditions.
GBP/EUR 1.1673 GBP/USD 1.3391 GBP/AED 4.9211
GBP/AUD 2.0933 GBP/CHF 1.0958 GBP/CAD 1.8463
GBP/NZD 2.2679 EUR/USD 1.1452 GBP/ZAR 24.2174