In the past week, currency markets have experienced significant movements, with key developments impacting the British Pound (GBP), Euro (EUR), and US Dollar (USD). As global trade tensions rise, the ongoing economic narratives in both the US and the EU are expected to have a profound effect on these currencies. This report provides a snapshot of the latest factors influencing the forex landscape, from tariff implications to central bank policies, offering insights into the current state and future outlook for each currency.

GBP 
The British Pound saw notable volatility last week, trading sharply around the 1.3000 mark against the US Dollar, as the UK faced a somewhat more favorable tariff scenario, with only 10% tariffs imposed by the US. This allowed for some relative stability in GBPUSD. Analysts at Bloomberg now suggest that there could be as many as four rate cuts from the Federal Reserve this year, driven by the potential for a slowing US economy, which could have a positive impact on the pound. Investors will also be watching UK GDP data, set for release on Friday, closely. The question remains: could the UK economy defy pessimistic expectations and demonstrate growth that might offer support to GBP, or will concerns over economic stagnation prevail?

EUR 
The Eurozone is facing a more significant challenge in the form of 20% tariffs imposed by the US, which the European Union has strongly condemned as ‘unacceptable.’ European Commission President Ursula Von Der Leyen has expressed a preference for negotiation but has also highlighted a ‘strong plan’ to retaliate if necessary. This has raised questions about the potential escalation of trade tensions between the US and the EU. The ongoing trade friction will likely weigh on the EURUSD outlook. The critical question is whether the Euro can continue to strengthen amid these tensions, or if the economic fallout from the tariffs will pressure the currency downward.

USD 
US President Donald Trump has followed through with his proposed tariff strategy, sending a strong message to overseas investors by asserting, “My policies will never change.” Despite this firm stance, both the US equity markets and the USD experienced a notable decline. The market’s response suggests a growing concern over the broader implications of Trump’s trade policies. This week, US inflation data will be released on Thursday, and all eyes will be on whether it shows further signs of easing. A soft inflation reading could exacerbate concerns about the US economy and contribute to additional weakness in the US Dollar, further complicating the Federal Reserve’s outlook on future rate decisions.

The outlook for global currencies remains uncertain as trade tensions continue to shape market sentiment. The British Pound, Euro, and US Dollar are all navigating critical challenges, with domestic economic factors and international trade policies playing a pivotal role in determining future movements. As the market braces for key data releases, including UK GDP and US inflation figures, the next few days could prove crucial in defining the trajectory of these currencies. Investors will be closely monitoring developments, particularly around US monetary policy and the evolving trade relationship between the US, EU, and UK.