The GBP has recently strengthened, surprisingly, by higher than expected public borrowing in June, which hasn’t helped ease fiscal concerns. Additionally, stronger than anticipated inflation and payroll figures have prompted investors to dial back expectations for Bank of England rate cuts, lending further support to GBP. While risks persist ahead of the autumn budget, the diminished fiscal uncertainty is contributing to the Pound’s stabilisation and gains against both the Euro and USD.
The Euro traded with caution as markets looked ahead to a speech by the European Central Bank president, who is unlikely to offer any major policy signals ahead of the upcoming interest rate decision. In the meantime, growing concerns over EU/US trade tensions particularly the prospect of new tariffs and retaliatory measures have capped the Euro’s upside. With no significant Eurozone data to drive momentum, broader uncertainty has kept investor sentiment subdued and the Euro’s performance restrained.
The USD slipped as political tensions and cautious signals from the Federal Reserve weighed on sentiment. Adding to the pressure, President Trump’s criticism of the Fed Chair sparked concerns about central bank independence, further undermining confidence in the Dollar. With no major U.S. economic data on the immediate horizon, the greenback remains sensitive to broader market sentiment and speculation over future interest rate moves. Investors are now closely monitoring upcoming Fed remarks for clues on the Dollar’s next direction.
