Day: May 12, 2025

This week, global currency markets remain sharply focused on geopolitical developments, particularly surrounding ongoing trade negotiations and economic data releases. The US-China trade talks continue to dominate sentiment, influencing USD performance, while key domestic data from the UK and Eurozone could steer their respective currencies depending on the tone and strength of the results. Below, we provide an overview of the key currency movements and potential market drivers in the coming days.

GBP
The British Pound was under pressure despite the Bank of England’s ‘hawkish cut’ last Thursday, where the central bank lowered rates but signaled a cautious stance toward future easing. The move was largely overshadowed by positive sentiment toward the US dollar, following news of a fresh trade agreement between the UK and the US.

This renewed trade alignment has supported the USD, limiting GBP gains. Domestically, traders are eyeing UK employment data due on Tuesday and GDP figures set for release on Thursday. However, market attention continues to gravitate toward broader international dynamics, particularly the developments in the US-China trade relationship, which could influence global risk sentiment and, by extension, Sterling performance.

EUR
In the Eurozone, political developments have taken center stage with the election of Chancellor Friedrich Merz at the second attempt. His ascent to leadership has prompted investors to reassess the strength and unity of the governing coalition, a factor that could potentially lend some support to the euro if political stability is perceived to improve.

Looking forward, speculation is rising about whether the Eurozone could become the next focus of US trade negotiations. However, it remains uncertain if it ranks high on the current US administration’s agenda. Meanwhile, Thursday’s Eurozone GDP release will be closely watched, as investors seek fresh indicators of the bloc’s economic resilience and potential implications for ECB policy.

USD
The US dollar has enjoyed strong support as markets responded positively to significant developments in US-China trade relations. Over the weekend, President Trump acknowledged that tariffs set at 145% would be reduced. Following talks in Geneva, both sides agreed to temporary tariff cuts: the US reducing rates to 30% and China to 10% for a 90-day period, during which a broader trade agreement will be pursued.

These developments are seen as a potential catalyst for continued USD strength, especially if further trade progress is made. On the economic front, US CPI data due on Tuesday could also play a critical role. Should inflation show signs of rising, it may reinforce expectations for steady interest rates, further supporting the greenback’s outlook.

While local data releases from the UK and Eurozone offer some potential for currency movement, the broader narrative remains heavily driven by US-China trade dynamics. With tariff reductions in place and further negotiations ahead, the market’s appetite for risk and optimism toward global trade recovery could determine currency flows in the near term. The USD stands to benefit from any favorable progress, while the GBP and EUR will likely remain reactive to both domestic data and the evolving international landscape.