Last week’s chaos saw the pound regain almost four cents against the US dollar but slip further against the euro. In fact, the euro was probably the world’s top performing currency over the five-day stretch, and GBP/EUR would fall to its lowest level since December 2023 before the end of Friday.
That didn’t reflect the UK’s economic growth numbers – February’s unexpected 0.5% expansion giving a timely boost to the public finances – but rather the ongoing trade war. The eurozone has avoided punishing tariffs for now and will look to negotiate an acceptable deal before the 90-day window slams shut.
Digging into the UK’s impressive GDP numbers, the fastest monthly growth since March 2024 was powered by a strong performance from both the manufacturing and services sectors. A rebound for homebuilders will please Labour, whose planning reforms aim to unlock new projects.
Much like the rest of the world, China seems to be fed up with Donald Trump’s tariff game. After announcing reciprocal tariffs of 125% on imports from the United States, Beijing said it would ignore any further rises as American goods had already been priced out of competitiveness. In a boost for giant tech companies, the White House has since announced a “temporary” tariff reprieve for some smartphone components.
Consumer sentiment in the United States plunged again this month. The University of Michigan’s influential study dipped to 50.8 from 57 in March, well below expectations of around 54. Part of the reason the study is so important is because it is a useful predictor of household spending, a real driver of the US economy.
Tariffs will rear their ugly head again this week, but focus will now shift to the nascent trade negotiations between the United States and its partners. Several countries have already lined up talks in an effort to avoid this mess playing out again in July.
Several important pieces of data also feature. The UK reports unemployment figures on Tuesday before a crucial inflation report on Wednesday. In America, the focus will be on retail sales and the housing sector.
On Thursday, the European Central Bank (ECB) will announce its next interest rate decision. Policymakers have the unenviable task of making sense of recent events. The consensus is that they will announce another 0.25% cut to the base rate, but that may well change before Thursday lunchtime.
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