Market Recap:
Investors brace for impact as new US tariffs take aim at the EU and Mexico, while key inflation and earnings data could also move markets this week.
Trump takes to social media:
Tariffs are firmly back on the agenda this week after President Trump took to social media on Saturday to announce 30% duties on imports from the European Union (EU) and Mexico, starting 1 August.
Markets will watch keenly for a response, with EU trade ministers scheduled to meet today (Monday). The euro had already weakened against the dollar last week, though it is still up around 13% against the greenback this year.
Euro climbs as pound sinks amid UK economic slump:
The pound also slid against the dollar last week, after figures showed the UK economy contracting for the second straight month. Both European currencies continued to slide against their US counterpart on Monday morning.
The euro strengthened further against the pound last week, and has now risen by over 1.7% against sterling in the last month.
Interest rates: stick or twist?
Disappointing UK growth figures have fed into investor sentiment, with markets now predicting further interest rate easing in August as the Bank of England (BoE) looks to bolster a slowing economy.
The rate currently stands at 4.25%. By contrast, the European Central Bank (ECB) is widely expected to keep eurozone rates unchanged at 2.15%.
Coming Up:
All eyes will be on the EU’s response to Trump’s latest tariff threat, with some European leaders pressing for a tough stance. This could translate into significant FX volatility.
In addition, key earnings data from four major US banks is expected on Tuesday, and could impact market confidence. Other significant data this week includes inflation figures in the US (Tuesday), UK (Wednesday) and EU (Thursday).
