A dismal week for the US dollar saw it weaken by over three cents against both the pound and the euro. GBP/EUR fell by half a cent on Friday, essentially erasing the pound’s modest advances on the week against its continental adversary.
If it was a bad period for the dollar, news that the United States had signed a trade deal with China allows it to resume with fresh optimism. The euro was also buoyed by reports that the eurozone was itself close to signing a trade deal with America. Donald Trump’s extended negotiating deadline expires on 9 July, remember.
On the same topic, British car manufacturers are already feeling the pinch from the recently signed trade pact. Despite the UK’s limited agreement with the Trump administration, British car shipments to the United States reached a 76-year low in May – more than halving over the course of just one month.
In what was a pretty wretched week for the prime minister, Sir Keir Starmer was forced to make significant concessions to avert more than 100 of his own MPs voting against planned welfare reforms. According to analysts, that climbdown could have a £5bn impact on the UK’s budget and might undermine the government’s credibility among investors.
The Federal Reserve’s Neel Kashkari said on Friday that the Fed may be able to cut interest rates twice this year, although a pause remained possible. Kashkari’s comments coincided with the release of troubling data for the American economy (more details on that below).
The week ahead provides little in the way of economic data that pertains to the pound, which will likely be influenced by politics and risk appetite.
Things are a little busier for the euro. Germany, Italy and the eurozone at large will report the latest inflation data this week.
After the giddy high of trade deals, the US dollar must now negotiate labour market figures. There are a couple of high-impact sector datapoints thrown in for good measure, and keep an eye out for the “Big, Beautiful Bill” passing through the Senate ahead of Trump’s 4 July deadline.
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