This week is set to be another volatile one in the financial markets. Following the recent passage of President Trump’s significant tax bill, markets now find themselves in an intriguing position, with traders weighing both economic optimism and geopolitical uncertainties. As we move through the week, several key data releases and political developments will likely drive market sentiment.
Currently, GBPEUR is trading around the 1.15 level, having gradually drifted lower in recent sessions. In contrast, GBPUSD remains resilient, holding above 1.36. It’s worth noting that this divergence, lower GBPEUR and higher GBPUSD; may well continue as a broader trend, particularly if European data continues to disappoint or geopolitical concerns persist.
Economic Highlights This Week
Monday: Eurozone Retail Sales
We kick off Monday with Eurozone retail sales figures, anticipated to decline by -0.6%. This notably weak projection is concerning and could exert downward pressure on the Euro, especially if the actual data meets or comes in worse than expectations. Traders should be prepared for possible early-week Euro weakness, particularly against stronger currencies.
Tuesday: RBA Interest Rate Decision
On Tuesday, the Reserve Bank of Australia (RBA) will announce its latest monetary policy decision. Markets are fully pricing in a 25-basis-point rate cut. While this reduction is largely anticipated, further Australian Dollar (AUD) weakness could occur if the RBA signals additional rate cuts or continued economic caution in their forward guidance. If you trade AUD pairs, be particularly vigilant around this announcement.
Wednesday: “Liberation Day” – U.S. Tariffs Deadline, RBNZ, and FOMC Minutes
Wednesday will likely be the week’s focal point, as U.S. tariffs are scheduled to take effect, dubbed “Liberation Day” by President Trump. We expect considerable volatility around GBPUSD and EURUSD pairs as markets closely monitor whether additional trade agreements or extensions emerge. Given past experience, last-minute agreements or tariff pauses may be announced to calm investor fears.
Additionally, Wednesday brings the Reserve Bank of New Zealand’s (RBNZ) interest rate decision, currently forecasted to remain unchanged at 3.25%. While no immediate rate changes are expected, markets will closely watch any commentary for insights into future monetary policy adjustments, particularly amid global economic uncertainties.
In the evening, the Federal Open Market Committee (FOMC) releases the minutes from their latest policy meeting. With markets currently not anticipating U.S. rate cuts until at least September, Fed Chair Jerome Powell may have limited room to shift market expectations significantly. However, traders will closely examine the minutes for any subtle hints on future policy direction or economic outlook adjustments.
Thursday: U.S. Weekly Jobless Claims
Thursday features U.S. weekly jobless claims data. With the U.S. labour market remaining robust, jobless claims are anticipated to edge slightly higher, reflecting seasonal adjustments rather than structural weakness. While unlikely to have a dramatic impact, unexpected deviations could trigger short-term volatility in USD pairs.
Friday: UK GDP Data
Finally, we end the week with UK GDP figures, expected at 0.1% growth. Although modest, this would be an improvement from the previous reading of -0.3%. A positive figure, even at this low level, might provide some support for Sterling heading into the weekend, signalling tentative stability despite broader concerns about the UK’s economic outlook.
Key Takeaways
- GBPUSD remains robust above 1.36, while GBPEUR has weakened to around 1.15, a trend likely to continue.
- U.S. tariff developments and last-minute trade deals could significantly influence currency volatility mid-week.
- Critical data releases (Eurozone retail sales, RBA decision, UK GDP) will shape short-term currency movements.
GBP/EUR 1.1570 GBP/USD 1.3576 GBP/AED 4.9907
GBP/AUD 2.0908 GBP/CHF 1.0822 GBP/CAD 1.8574
GBP/NZD 2.2647 EUR/USD 1.1719 GBP/ZAR 24.1663