Trump extends EU tariff deadline to 9th July, USD weakens

The USD weakened considerably vs major peers at the end of last week. The ever-changing tariff landscape and a ratings downgrade to the USD have undermined the market’s confidence somewhat. The delay on EU tariffs (currently threatened at 50%) to 9th July and the 255 ‘threat’ to Apple did nothing to help the USD.

EUR/USD at 1.1400
GBP/USD at 1.3575

US Fed officials continue to emphasise the fear of stagflation due to policy uncertainty and supply-chain issues. The suggestion for now is that the Fed will keep an open mind on whether to reduce interest rates - this Wednesday sees the publication of the last meeting’s minutes.

GBP: The market is now expecting just one more 0.25% rate cut in 2025 from the Bank of England, which is supporting the currency and pushing GBP/EUR up to 1.1900 and GBP/USD to 3yr highs. Last week’s inflation data was 3.5% annually and 2.6% in April. Retail Sales were also way above expectations - adding a positive tone to GBP.

EUR: Relatively unaffected by Trump’s threats and extended deadlines, and benefiting from a weak USD.

AUD: The central bank delivered rate cut as expected and signalled that further cuts will be undertaken if necessary. However, as optimism surrounded US-China trade issues, AUD remains supported as Australia and China are major trading partners.

·    This week’s data:

Tuesday:
EU: Business confidence and sentiment data & speeches from Central bankers

Wednesday:
AUS: Inflation data
NZD: Interest rate decision
USA: Minutes from last policy meeting

Thursday:
UK: Bank of England speeches
USA: GDP data / Employment data

Friday:
AUS: Retail Sales
Germany: Inflation data