The GBP climbed sharply this week as improved investor sentiment and a brighter global outlook lifted risk assets. Despite lingering concerns over UK fiscal policy and weak economic data, GBP showed resilience, advancing in a risk-on environment. With no clear domestic trigger behind the move, the Pound’s gains appeared driven by market positioning and broader confidence, supporting its short term strength early in the week.
The Euro softened as markets absorbed the implications of the EU/US trade deal, which introduced moderate tariffs and sparked concern among European exporters. While initial reactions were upbeat, the single currency lost traction amid persistent trade risks, cautious investor sentiment and expectations of weaker Eurozone GDP figures. Adding to the pressure were speculative positioning, elevated carry costs and ongoing uncertainty surrounding future European Central Bank policy, all of which weighed on the Euro early in the week.
The USD firmed after the announcement of the EU trade deal, buoyed by improved market sentiment and easing tariff concerns. With trade tensions subsiding, attention has turned to the Federal Reserve’s policy outlook. Investors are closely watching upcoming economic data, particularly employment and inflation figures that could shape future rate expectations. While recent gains may moderate, the Dollar is likely to stay supported unless the Fed signals a clear move toward more dovish monetary policy.
