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The pound weakened slightly on Friday at the end of another fraught week.
Sterling weakened by over a cent against the US dollar and the euro over the course of last week, with events coming to a head on a remarkable day of drama in financial markets and Westminster.
The bond market’s tantrum has now seemingly passed (until the next time), but not before borrowing costs soared and piled yet more pressure on the pound. As if there wasn’t enough tension, Wednesday (9 July) marks the end of Donald Trump’s extended trade negotiation deadline, with a slew of major economies facing steep charges on core goods.
Among these economies at risk of falling foul of the deadline is the eurozone. While the two sides are close to making a deal, it seems the US president is losing his patience. The Trump administration hit the eurozone with an eleventh hour threat to slap a 17% tariff on European agricultural produce.
House prices in the United Kingdom were unchanged month-on-month in June, according to the Halifax house price index. That came after an upwardly revised 0.3% fall last month and now means house prices have increased by 2.5% on an annualised basis, the slowest rate of growth since July 2024.
After last week’s chaos, any sort of calm would be welcome for the pound. This week is light on data, with the notable exception of May’s GDP report. After a dismal performance last month, sterling is in urgent need of a pick-me-up.
German balance of trade numbers will come under the spotlight on Tuesday, particularly with trade being such a hot topic at the moment. Over in the United States, the Federal Reserve’s minutes from its last meeting will be the key event, aside from frantic negotiations with a sizeable percentage of the world’s GDP, of course.
And lastly, our July-September Quarterly Forecast will be published this Thursday (10 July). Be sure to pick up your copy to learn where currency markets might move next, as well as our usual analysis of all the key data, events and trends that could impact your budget in the months ahead.
Make sure any upcoming transactions are protected against the risks of sudden market movements. Secure a fixed exchange rate now with a forward contract; call your account manager on 020 3918 7255 to get started.
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Last week’s sharp increase in gilt yields (plus the additional spending that came with the revised welfare bill) has stretched the government’s budget to breaking point. In lieu of tax cuts, the only real solution for the government is to bolster the Treasury by finding economic growth. Doing so will be no mean feat.
GBP/USD: the past year
EUR: A month for the ages
June was a hugely successful time for the euro, which surged by almost five cents against its key rivals the pound and the US dollar. July immediately begins with the risk of trade, but the euro can take heart from its strong performance in the face of adversity.
GBP/EUR: the past year
USD: Fourth brings fireworks
America’s Independence Day meant markets were closed to end the week across the Atlantic. But Republicans were able to finally celebrate the passing of the massive One Big, Beautiful Bill act. History and the US dollar may be a little less generous in their celebration of this moment, but only time will tell.
EUR/USD: the past year
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