Despite some early spikes in trading, Monday saw the pound, dollar and euro end much where they began. The euro was very slightly ahead of both, up by 0.17% on the dollar and 0.01% on the pound.
There was a lot more activity on the stock market, as news that Iran was seeking a ceasefire with Isreal sent the FTSE 100 to a near record high.
In good news for the pound ahead of Thursday’s Bank of England interest rate decision, US president Donald Trump signed off the US/UK trade agreement. The contract marks the first trade agreement the US has completed since the start of its president’s trade war in April.
It’s a big week for the pound. As well as the interest rate decision on Thursday – which is currently forecast to hold at 4.25% – Wednesday sees the release of new inflation data. Between these two economic moments, the pound could see a lot of volatility.
The US has a similarly filled week ahead. Today new data on retail sales, imports, exports and industrial production will be showing the impact of Trump’s trade policies. Then, on Wednesday, along with more economic data, the Federal Reserve Bank will announce its own interest rate decision.
Trump has been pushing Fed chair Jerome Powell hard to make a 1% cut but he is predicted to resist the pressure and hold the rate steady at 4.5%. The last time Trump picked a public fight with Powell, his threats to remove the chair from his position caused a panic in the markets, so the dollar may well move significantly this week.
Europe may not have an interest rate decision this week, but with multiple economic and industrial data reports due to be published in the coming days, the euro will not only be driven by what happens to the pound and dollar.
Later this morning, for instance, Germany’s Centre for European Economic Research will publish its economic sentiment index. The report will show how Europeans feel about the markets since the ECB cut interest rates and got inflation below its 2% target. It’s forecast to show a rise in positivity – in contrast to the US and UK.
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