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The euro faces a key week of economic data as well as the fallout from an increasingly unworkable US relationship.
The euro stands to lose the most in a week headlined by economic data and another interest rate decision from the European Central Bank (ECB). Threats of tariffs from the United States can be added to the worry list, along with the almost complete pivot in transatlantic relations that left Europe stunned.
After unprecedented drama in the White House, it was little wonder attention drifted away from economics. European leaders met on Sunday for a high-profile show of solidarity with Ukraine, as well as to discuss future security requirements without the implicit support of the United States. Adjusting to a new geopolitical backdrop will take time, but the one benefit of American foreign policy has been its galvanising effect on European defence efforts.
All this didn’t stop the usual flow of data, of course. German inflation rose to 2.3% in January, a shade more than had been expected. As if to underscore just how tough the job of a European central banker is, headline inflation in France slumped to 0.8% in the same period, well below the 2% target.
Some interesting GDP figures were released at the tail end of last week. Canada, much derided in recent weeks by Donald Trump as the “51st state”, grew its economy by an annualised 2.6% in the last three months of 2024.
India’s economy grew at an annualised rate of 6.2% in the final quarter of 2024, slightly below forecasts of a 6.3% expansion. If that number seems eye-wateringly high, it’s worth remembering that the economy grew at a rate of more than 10% across 2022.
While Sir Keir Starmer got through last week’s meeting with Donald Trump largely unscathed, his decision to cut aid to boost defence spending had consequences within his cabinet. International development minister Annelise Dodds resigned on Friday, citing inevitable cuts to projects in Ukraine, Gaza and Yemen.
The week ahead is chock-a-block with impactful economic events. The biggest of these is the European Central Bank’s next interest rate meeting, where it is expected to announce a sixth interest rate cut in nine months.
Things are more sedate for the UK but remain busy in the US. Manufacturing and services data, non-farm payrolls and unemployment will all flash across the ticker before the week is out.
Make sure any upcoming transactions are protected against the risks of sudden market movements. Secure a fixed exchange rate now with a forward contract; call your account manager on 020 3918 7255 to get started.
GBP: Calmer seas
The pound came out of last week with credit, navigating a tricky passage from both an economic and geopolitical perspective. The seas have calmed for now but nobody should be betting the house on a strong pound given all the present uncertainty.
GBP/USD: the past year
EUR: Inflation frames ECB decision
France, Italy and Germany all reported inflation data to round out last week. With the ECB due to make its latest interest rate decision on Thursday, the euro’s next moves will depend very much on how the inflation data is received, along with how the central bank frames its next steps.
GBP/EUR: the past year
USD: Let the numbers do the talking
American markets showed their first signs of frustration with President Trump’s loose lips last week. Just as stock markets were rising, and with robust economic data rolling in, new talk of tariffs sent markets down, even if the US dollar received a small bump. Trump will be keen to stay on the right side of things, particularly given his propensity to equate stock market performance with political competence.
EUR/USD: the past year
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