While the dollar is still broadly down against the pound and euro, Tuesday saw it make gains after better-than-expected jobs data. Sterling meanwhile saw 0.4% growth over the euro, as the markets prepare for the European Central Bank to cut interest rates on Thursday.
In the UK, Bank of England governor Andrew Bailey warned MPs interest rate cuts were more uncertain because of US president Donald Trump’s tariffs. He says the bank’s intention is still to cut the rate from 4.25%, but how big and fast those cuts can be is more unclear than at the start of the year.
World businesses, Bailey says, are unsure whether to invest in growth because the global trade system is changing so quickly. His warning was echoed by the Organisation for Economic Co-operation and Development (OECD), which downgraded UK growth prospects for 2026 to just 1%.
However, despite these two pieces of bad news, the pound gained 0.4% on the euro on Tuesday, gaining half a cent over the course of the day. Though, that may be more down to traders moving their money ahead of a predicted ECB interest rate cut on Thursday.
The cut looks significantly more likely as Tuesday’s eurozone data showed the inflation rate in the bloc fall to 1.9%, down from 2.2% and lower than the 2.1% forecast. The need for an interest rate cut grew, too, as the same OECD data announced growth downgrades across the eurozone.
After hitting a near three-year-low against the pound on Monday, the dollar grew off the back of surprising April jobs data. The impact of the “liberation day” tariffs may not be indicated, but the US Bureau of Labor Statistics revealed the country’s job openings increased by nearly 200,000 to 7.39m, way above the 7.1m expectations.
Later today more data from the US will reveal how its services industry is performing. Then, on Friday, fresh employment data will show how the tariffs have impacted joblessness in the US.
That is to say, across Europe and the US, there is significant economic news coming that could impact currency exchanges.
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