Weekly Round-Up & The Week Ahead

Weekly round-up and a look at the week ahead for EUR, GBP, and USD.

DAILY ANALYSIS

USD

President Trumps ‘breathtaking fiscal policy excess’ and attacks on the Federal Reserve’s independence continue to weigh heavy on the US’s status as the ultimate safe haven for foreign investors. A poll conducted by the Kent A Clark Center for Global Markets at the University of Chicago found that more than 90% of economists surveyed were either somewhat or very concerned about the haven status of the US Dollar over the next 5-10 years report the Financial Times this morning. The White House insist that Trump’s policies WILL help cut US debt and that the President’s ‘big, beautiful bill’ will aid this however, independent estimates suggest that the bill will push US federal debt past its previous high’s not seen since WW2, later this decade. Last week, geo-political tensions caused the markets to open in a volatile fashion for the Dollar with diplomatic relations in the Middle East seemingly escalating into a no-going-back status however, since then, the ceasefire has been maintained by Iran/Israel and things have calmed down… for now.

A flurry of data out of the US was interpreted by analysts last week with PMI’s on Monday in majorly expansionary territory, GDP however, reported on Thursday at -0.5% versus expectations and previous of -0.2%. Fed Chair Powell testified on Tuesday and Wednesday and with Trump eluding to replacements for him due to his reluctance to cut interest rates amid tariff negotiations and trade wars, the sovereignty and independence of the Federal Reserve began to be questioned, causing further depreciation for the ever-turbulent Greenback. On Friday, Core PCE, the Fed’s preferred measure of inflation was released with a slight uptick in the MoM reading from 0.1% to 0.2% whilst YoY also increased by the same amount from 2.6% to 2.7%. This week, Fed Chair Jerome Powell will be back at the booth on Tuesday afternoon, quickly followed by ISM Manufacturing PMIs. On Wednesday, the latest bout of labour data for the US is kicked off with ADP Employment Change, followed by Average Hourly Earnings, and an ironic early reading of Nonfarm Payrolls on Thursday due to 4th July celebrations in the US on Friday.

EUR

Reports suggest this morning that the US Dollar uncertainty, may have caused an opportunity to arise for the Euro to mount a challenge to the centrality of the dollar in global finance. The Euro would need to reform its disjointed government bond markets in order to really pose a threat which will be a long and painful process however, if the euro was able to complete a successful ‘glow up’ and produced a potentially unified government bond backed by each member state then, there is potential for the Euro to become the safe-haven over the coming years. Last week, data remained at a premium as the single currency continues to tip-toe through the current uncertainty in global markets and remain the best performing of the 4 major currencies. The data we did see, in the form of PMIs on Monday, was by no means super encouraging but, was without enough surprise to upset the current equilibrium or panic markets in comparison to other factors at play.

This week, Core and Regular HICP readings will be released tomorrow with economists keen to see if the data can start to support the sentiment surrounding the Euro at the moment, whilst ECB President Christine Lagarde will also speak in back-to-back days on Tuesday and Wednesday. Aside from that, price direction will likely be driven by its G7 counterparts. This morning, GBP/EUR trades below 1.17 again, whilst EUR/USD continues to push higher above the 1.17 mark.

GBP

This week marks 1-year since Labour took leadership, it was July 2024 when Prime Minister Sir Keir Starmer stood on the steps of Downing Street and laid out bold plans. After a tumultuous first year in office, it seems that some of the priorities set out by the new government have been a little harder to achieve than perhaps first expected. Growth was listed as the ‘number one mission’ by the new Government however, a year on, business optimism is muted, and the economy shrank in April at its fastest pace since 2023. With further tax hikes now seeming likely in the Autumn due to a deficit that continues to spiral, confidence for the UK economy continues to dwindle. Data was on the quieter side last week, with a mixed result of PMI’s reported on Monday. Manufacturing remained in contraction however; services did uptick and remain expansionary. The composite, edged above the 50 level which pertained that the economy does remain in expansionary territory. Later in the week, Governor Bailey was at the stand again and economists seem to believe he will be left with no choice but, to cut rates at the next meeting and give the economy a much-needed cash injection.

This morning, GDP reported for the UK with both QoQ and YoY readings in line with expectation and previous at 0.7% and 1.3% respectively. Governor Bailey will take to the stand again later this week as economists are keen to decipher any further sentiment on rate cuts. GBP/USD trades this morning above the 1.37 mark.

Daily Rates

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