Weekly Round-Up & The Week Ahead

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

DAILY ANALYSIS

USD

A big week ahead for the Trump administration as the self-imposed deadline of July 9th looms – Trump delayed the higher levies introduced on ‘liberation day’ as markets took a dive following the announcement. The pause was designed to make time for trading partners to strike a trade deal with the US that would exempt countries from the higher levies, however to date only three countries, UK, China and Vietnam, have been able to strike a pact. US Treasury Secretary Scott Bessent commented yesterday that tariffs on imports from some countries will ‘boomerang’ back to the initial levies on August 1st if a trade deal/agreement cannot be reached and that Trump would be sending letters to his foreign counterparts reaffirming the higher tariffs will come into effect next month.

The political landscape takes centre court this week, however last week was all about the data, fears have been growing over a collapse in the US labour market as a result of ‘liberation day’ and last week’s releases didn’t quite serve up an ace with regards to reassurance. The mixed bag of employment data will only amp up anticipation for the next round of releases – JOLTS Job Openings for May was the first release that overshot forecasts of 7.3m with a final reading 7.769M. The tone was set that fears over a labour market may be erroneous, ADP Employment Change swiftly quashed that rhetoric with a bleak reading of -33k versus 95K forecast. Nonfarm Payrolls were to be the tie breaker, with a forecast of 110K against 144k in May, the final reading of 147K came as welcome surprise to investors and the dollar alike. Average Earnings did halve to 0.2% for June versus expectations of 0.3% but ISM Manufacturing & Services PMI both outperformed forecasts with Servies PMI retuning above the 50-mark signaling expansion. The greenback, which has had its worst performance in H1 since 1973, has gained traction in the early part of the trading session as EUR/USD trades back below 1.1740.

GBP

A tough couple of weeks for Sir Keir Starmer has resulted in a poll on Sunday suggesting Reform UK is on track to defeat the labour party at the next election despite being at least 4-years away. Labour are looking to get back on the front foot as ministers have announced a £500m scheme, Best Start, to help disadvantaged children offering parenting support and youth services to every local authority in England. The scheme piggy backs off one the most popular policies back in the Tony Blair era when ‘Sure Start’ centres were set up in the early 2000’s. Data released from Dealogic shows fundraising from IPO’s in London has reached a 30-year low reinforcing the lack of appetite for UK’s equity markets as London struggles to compete with the deep liquidity pockets of Wall Street. The issue London faces is the more high-profile IPO’s that move to Wall Street the larger the reluctance will be to list in the UK creating a vicious cycle – the latest damage to UK stock markets is talks of the largest listed company AstraZeneca have spoken privately about moving the listing to New York.

Data out the UK last week was extremely light with BoE governor Andrew Bailey speaking being the most notable event, Bailey expressed concerns of the accuracy of the Office for Budget Responsibilities forecasting as figures have been consistently downgraded exerting additional turmoil to UK markets. BRC Like-For-Like Retail Sales for June kicks the weeks data off this evening – we then have to wait until Friday to digest the latest MoM GDP, Industrial and Manufacturing Production figures. GBP/USD falling back below the 1.3600 handle through a combination of GBP weakness and USD strength – once again the pound struggling to make any organic gains.

EUR

European leaders remain at deuce over how to respond to the Trump deadline, the European Commission who are negotiating on behalf of the bloc reached out to over the weekend to European heads of state seeking guidance on how whether to accept the higher tariffs or increase pressure on the US themselves. Countries that are heavily reliant on exports such as Germany, Ireland and Hungary are in favour of concluding a swift deal however France and Spain are reluctant to accept a deal just for the sake of it – EU Commission president Ursula von der Leyen said she hoped for an agreement in principle that would enable negotiations to continue for a final deal and avoid the sectorial tariffs.

European data released last week doubled down on the appetite for European markets since ‘liberation day’, Eurozone inflation for June came in at 0.4% MoM whilst YoY figures held at 2.3%. PMI’s released for Spain, Germany and the bloc all out paced forecasts as Eurozone Services and Manufacturing figures remain above 50. The only blight on last week’s releases came out of Germany, CPI data came in at 2% but the concern will be Factory Orders which declined heavily by 2% at -1.6% versus -0.1% forecast – German Chancellor Friedrich Merz has been extremely vocal with regards to the tariffs impact to the German economy. EUR/GBP holding on to the recent gains trading at 0.8630 at the time of writing.

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