Sterling ended Friday with a blistering run against the euro and the US dollar, which saw GBP/EUR strengthen by half a cent and took GBP/USD to its highest level in well over three years. That has continued this morning against the euro, if not the US dollar.
Some good news on the consumer spending front gave the pound a solid platform, but the biggest driver of its performance was comments from President Donald Trump. Frustrated by a perceived lack of progress in negotiations, Trump warned the eurozone could face a 50% tariff on imports as early as next week.
The euro might have finished the week stronger had it not been for this bombshell. German economic growth in the first three months of the year was upgraded from an initial estimate of 0.2% to 0.4%. Once again, much of this strength was driven by strong trade figures ahead of “Liberation Day”.
In an extraordinary move, the President also threatened to slap a 25% levy on Apple. Putting trade barriers on an American business is an exceedingly rare move and comes after Apple indicated it would move large parts of its iPhone manufacturing process from China to India.
In a week shortened by the UK bank holiday and Memorial Day in America, much of the action is clustered toward Thursday and Friday.
A handful of eurozone nations (including Germany) will report inflation figures from April, while a brief gap in British data could see sterling’s direction dictated by political movements.
The US dollar will likely be volatile as instability in the bond market shows no sign of dissipating. Durable goods orders, the Core PCE price index as well as another quarterly GDP estimate could add to that upheaval.
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