The pound fell to a three-week low on Monday, losing 0.17% against the dollar and twice that against the euro. Meanwhile, following the news that US President Donald Trump plans to implement a 30% tariff on EU imports, the euro grew more than 0.2% on the dollar.
Bank of England Governor Andrew Bailey buoyed predictions of an August interest rate cut after telling The Times that he “believe[s] the path is downward”, though he admits the pace and direction of interest rates could change depending on unemployment figures and inflation data.
Tomorrow sees fresh UK inflation data – which is predicted to climb from 3.4% to 3.5% – and Thursday brings new unemployment data. So, while the Monetary Policy Committee is widely expected to make an interest rate cut when they next meet on August 8, the data published this week could change their minds.
Over the weekend, Trump announced plans to hit the EU with 30% trade tariffs and warned that any retaliation would see an immediate increase to that figure. The news saw European stock markets fall, as traders looked for safer places to hold their assets.
Later today the US will publish its own inflation data, which, like the UK’s, is predicted to rise by 0.1%. The rise lends ammunition to Federal Reserve Chair Jerome Powell’s decision to hold interest rates steady, although it still doesn’t show the significant rise driven by tariffs that analysts predicted earlier in the year.
While the euro ended Monday up on both the dollar and the pound, it would have been significantly higher on the dollar if not for the news of 30% tariffs. Maroš Šefčovič, the EU trade commissioner, says the duty will make it “almost impossible to continue” current transatlantic trade.
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