The US dollar stabilised last week following strong jobs data and easing trade tensions, but uncertainty remains as markets brace for upcoming central bank interest rate announcements. While major currencies saw limited movement, underlying risks tied to global growth and geopolitical policy could drive renewed FX volatility.
Market Recap:
The dollar steadies as investors focus on interest rates: A quieter week on foreign exchange markets as the dollar arrests its slide against the pound and euro, but more volatility may be on the way
The dollar stands firm – for now: Better than expected jobs figures and more conciliatory noises from the White House around tariffs on China buoyed the US stock market. Nevertheless, while the pound edged downwards against the dollar last week, sterling has gained 3.2% against the greenback since the start of April.
Markets pause for breath: There was less movement between major currencies last week, with the dollar recovering little of the ground lost since President Trump’s “liberation day” tariffs announcement at the beginning of last month, despite a series of tariff roll backs and carve outs since. The euro has been one of the chief beneficiaries of uncertainty in foreign exchange markets, gaining more than 10% on the dollar since the beginning of the year.
The euro rally continues: The euro also rallied further against the pound, and has now gained 0.99% in the last month, though it is down 0.68% against sterling since this time last year.
Market Outlook:
Possible volatility ahead: President Trump’s bullish approach is impacting global growth forecasts, and the International Monetary Fund (IMF) recently downgraded its GDP expectations for 2025 and 2026. An extended period of uncertainty now seems likely, which could bring more volatility to foreign exchange markets as investors seek safe havens for money and retreat from risk.
Interest rates in the spotlight: Next week will see central bank interest rate decisions in a number of markets around the world, including the US and UK. Interest rates lead to currency fluctuations as investors seek the best returns. Their impact on general economic sentiment can also lead to currency movement, and shifts in currency rates can significantly impact overseas payments.
