Despite its shaky start to the week, following massive losses in the tech sector, the dollar recovered and gained on the euro. However, out of the turmoil, the pound gained on both.
Proving once again that confident predictions of the currency market’s movements can make fools of us all, the dollar rallied on Tuesday. This is despite a trillion-dollar selloff in the US tech sector on Monday and a 2% fall in the country’s durable goods orders, a greater decline than forecast.
It’s difficult to pin the turnaround on any one factor: US treasury secretary Scott Bessent is alleged to be planning to push for universal tariffs on US imports, the tech selloff following the release of Chinese company DeepSeek’s new AI model spread to impact EU and Asian markets, dampening rival currencies, and anticipation of the US Federal Reserve will hold the interest rate steady at 4.5% may all contribute.
Another potential factor is a set of negative market data coming out of the eurozone countries and souring forecasts for the continent’s prospects. This morning, German consumer research group GfK published its consumer confidence review, revealing it had declined a whole point to -22.4, worse than forecast. Respondents to GfK’s survey reported diminished economic prospects, lower income expectations and a lower willingness to buy. All this negativity is encouraging Germans to save, pushing hopes of economic growth further away.
Thursday will see the release of GDP and unemployment rates for the Euro Area and growth figures out of France, Italy and Germany, all of which are predicted to further indicate stagnation.
In the face of stagnation in Europe, but without any data releases of its own, sterling seems to be benefitting. Today, UK chancellor Rachel Reeves is due to announce several national infrastructure projects aimed at increasing growth, including a third runway at Heathrow, all of which may be reassuring the markets.
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