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The pound and euro regained some ground against the US dollar on Friday.
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.
Of course, all that good work could be for naught if Congress fails to agree to a spending agreement by Midnight on Tuesday. Should that happen, we’ll get an interruption in the flow of labour data, which would see Friday’s figures at the very least kicked into touch.
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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GBP: In it for the long haul
Sterling’s struggles over the summer have been well documented, but there’s little grounds for predicting a turnaround in the near term. Persistent concerns around government spending haven’t gone away, while the latest maneuvering within the Labour party adds an element of political uncertainty to the mix.
GBP/USD: the past year
EUR: Reality check
Last week provided something of a reality check for the euro, which had previously been basking in the warm waters of a multi-year high against the US dollar. The euro held its own against the pound but weakened by over a cent against its American foe.
GBP/EUR: the past year
USD: Expectation on the Fed
The US dollar took a hit to end last week with focus shifting once again to the Federal Reserve. Markets took the latest core PCE report as a sign that faster interest rate cuts were on the horizon, placing strain on the US dollar and adding to the pressure Fed members must be feeling.
EUR/USD: the past year
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