Sterling was able to end a testing week on a positive note last Friday, as news of yet more trade tariffs and cooling inflation from the United States dented demand for the US dollar.
The pound clawed back over half a cent against the US dollar on Friday – a good start but not enough to recover from steep falls on Wednesday and Thursday. Trading was less volatile in continental markets, where the pound finished honours even against the euro across the week.
After focusing much of his recent energy on pharmaceuticals, President Donald Trump unveiled tariffs of 100% on branded products. Trump did caveat that with the offer of an exemption for all companies building a manufacturing plant in the United States.
Despite the emergence of fresh barriers to trade, the economic tension over in America was eased last week with news that growth in the second quarter was significantly higher than expected. Another pleasing data point was August’s Core PCE price index, which rose by just 0.2% last month. Personal spending and income measures were also on the rise.
Looking ahead to this week, inflation will be very much on the menu for the euro area. Germany, Italy, and France are all lining up their latest figures, with the latter most likely to ruffle some feathers as the crisis in French parliament rumbles on. The combined eurozone inflation data for September will be released on Wednesday morning.
Another flurry of data for the United States might offer a better insight into the state of the labour market. The JOLTs job opening report, non-farm payrolls and unemployment figures will be closely watched this week.
On a more ominous note, currency markets will be monitoring any further retribution against Donald Trump’s politicial enemies. Former FBI Director James Comey was indicted last week, and the president promised “there will be others” on his way to the Ryder Cup.
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