The GBP began the week trading within a tight range, with limited movement amid a quiet UK data calendar. Market sentiment was the main driver, as investors awaited upcoming retail sales figures for fresh direction. In the absence of strong domestic catalysts, the GBP’s performance remains subdued, with the market looking for clearer signals to set the tone in the days ahead.
The Euro has shown unexpected resilience despite political turmoil in France, including the collapse of the Bayrou government. Investor confidence in President Macron’s ability to swiftly appoint a new prime minister has helped contain uncertainty. Still, ongoing political gridlock, social unrest and fragile public finances present longer term risks. Without a rapid return to stability, sentiment could sour, leaving the Euro more exposed in the weeks ahead.
The USD extended its decline, sliding to a seven week low as investors grew more confident that the Federal Reserve will cut rates in September. The move was fueled by weaker than expected labour data, pointing to a cooling job market. Attention now turns to this week’s inflation figures, which could prove pivotal for rate expectations. Until then, the USD remains under pressure, with markets highly responsive to any shift in Fed signals.
