Market Recap:
Market stability amid policy shift: Markets were largely becalmed for much of last week as investors digested what appeared a significant relaxation in the Trump administration’s aggressively protectionist stance. Tariff deals with China and the UK buoyed the dollar as the greenback continued a modest rally against the euro and pound.
All change as tariff talk returns: By the end of the week, everything had changed. On Friday President Trump announced a 50% levy on all imports from the eurozone, slated to begin on 1 June. FX markets reacted quickly, with the dollar edging downwards against both of the major European currencies.
By Monday, everything changed again. After a phone call with EU chief Ursula von der Leyen, Trump announced a delay in the 50% tariff until 9 July, to allow time for negotiations. The euro immediately trended higher on the news, hitting its strongest level against the dollar in nearly a month. The pound, already buoyed by some strong UK economic data, headed towards its highest level against the greenback for three years.
The dollar has now lost over 9% of value against the euro so far in 2025 and around 8% against the pound.
Coming Up:
What does all this mean for money markets? Volatility seems the most likely answer. Investors will now follow the progress of negotiations closely, looking for hints of progress or signs of blocks in the road. Exchange rates may fluctuate widely as investors look for better returns or safe havens in a rapidly evolving situation.
Economic data may move markets: The week will also see some important economic indicators from the EU, with consumer confidence, services sentiment and industrial sentiment data all due on Tuesday. These indices may impact growth forecasts for the rest of the year. A rising GDP often leads to a strengthening currency, while the opposite is also true.
On the same day, the US will release its latest house price data, a traditional indicator of consumer sentiment and the state of the domestic economy. Good news may bolster the dollar as it continues to struggle. On Thursday, preliminary Q1 GDP data may also move markets.
