As global trade relationships come under increasing strain, this week offers a revealing snapshot of how major economies are coping with the ripple effects, from inflation pressures to political manoeuvring. With pivotal UK, EU, and US data and developments on the calendar, investors will be watching closely for signs of stability… or further volatility. Here’s what to watch.

GBP: Can the UK Turn Trade Talk into Market Confidence?

Sterling starts the week with an eye on diplomacy. Monday’s UK-EU summit could offer a rare glimmer of clarity, especially if it results in concrete cooperation or progress on post-Brexit trade issues. But sterling is still vulnerable to sentiment-driven swings — and markets will want substance over symbolism.

Last week’s cooler-than-expected US inflation data has reignited debate over whether the UK will follow suit. All eyes now turn to Wednesday’s CPI figures. If price growth slows, markets could begin pricing in less urgency for further rate hikes, but it may also spark concern over underlying demand.

Meanwhile, Friday brings a barometer of consumer sentiment: retail sales. With the UK public increasingly aware of the potential impacts of new tariffs and ongoing trade deal discussions, this data may reveal if consumers are tightening their belts, or spending in spite of the noise.

EUR: Tariff Talk and Economic Telltales in Focus

The eurozone finds itself navigating two fronts this week: diplomatic sparring over trade, and critical data that could reveal the real-world economic impact.

European Trade Commissioner Maroš Šefčovič met with US Commerce Secretary Howard Lutnick last week, pledging to deepen engagement. But cooperation seems strained, especially after the EU reiterated its refusal to accept ‘reciprocal’ tariffs and prepared a €95 billion retaliation list in case negotiations fail.

Investors hoping to read between the lines will have their chance on Thursday, when Flash Manufacturing and Services PMI figures are released. These indicators will provide insight into how European businesses are coping with rising trade tensions and whether momentum is holding up under pressure.

USD: Uncertainty Reigns as Policy Shifts Take Shape

President Trump’s tariff bombshell on Friday that trading partners will soon receive individual letters outlining their new tariff rates has markets bracing for impact. With current rates hovering around 18% and little transparency on what’s coming next, the only constant is uncertainty, and markets historically don’t respond well to that.

On the monetary side, US CPI data showed a softening trend last week, but Fed Board Member Michael Barr’s warnings of potential tariff-induced stagflation paint a more complicated picture. Slowing inflation may give the Fed breathing room, but not if tariffs start choking off growth while keeping prices elevated.

Meanwhile, reports suggest that behind-the-scenes discussions are ongoing between the US and South Korea around foreign exchange policy, adding another layer of intrigue and speculation over the direction of the dollar.

In Summary: The Calm Before the Storm, or the Eye of It?

With markets already skittish, this week could set the tone for how currencies move in the near term. Investors are looking for direction, whether from CPI data, political summits, or the next volley in the global tariff battle. Will clarity emerge, or will further uncertainty push currencies into defensive mode?

Either way, one thing is clear: this isn’t a week to tune out. The signals emerging now could shape central bank decisions, business confidence, and currency performance for months to come.