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Global currency markets opened the week under pressure as President Trump announced a 30% tariff on EU imports, effective 1 August. This move has led to declines in both US and European stock indices. While the European Union seeks a swift resolution with the US, it is also engaging with other affected countries, including Japan and Canada, to mitigate the impact of the tariffs.
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GBP
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The GBP declined as indicators suggest the UK economy is losing momentum. Recent GDP figures fell short of forecasts, revealing a contraction of 0.1 percent. Investor caution was evident last week, with gilts seeing significant gains. GBP finished last week weaker and continues to face pressure amid growing economic concern.
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USD
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The USD gained ground as markets responded to rising trade tensions between the US and the European Union. Even though global stock markets fell, USD held firm, supported by worries about tariffs and the broader economic outlook. This relative strength sets USD apart from other major currencies, which have softened.
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EUR
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The EUR declined following the news of new US tariffs targeting European products. While the European Union aims for a swift resolution, it is also preparing for broader trade negotiations by reaching out to countries such as Japan and Canada. This ongoing uncertainty is putting pressure on the EUR, and investors remain cautious.
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JPY
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The JPY edged higher as the EU opened discussions with Japan about the effects of US tariffs. Amid increasing global trade uncertainties, the JPY remains a favoured safe haven currency. This cautious environment contributed to the JPY’s modest appreciation against the USD.
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The GBP could continue to experience downward pressure this week as important UK inflation and employment data are due on Wednesday and Thursday. Ongoing inflation concerns combined with increasing worries about stagflation may weigh on GBP/USD and cause further declines. However, similar market conditions in June saw GBP rally to levels last seen in 2022, indicating that the USD’s strength may not be guaranteed.
At the same time, all eyes will be on the United States, where key inflation figures and retail sales data are expected. These releases are likely to shape investor sentiment and influence the USD’s movement throughout the week.
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HOW WE CAN HELP
Our experienced currency team is here to ensure you make the most of your international transfers. By gaining a clear understanding of your goals, we offer personalised support and recommend the most suitable strategies to help you navigate the currency market with confidence. Get in touch with Osman Hanif today on +44 (0) 20 3371 9200 or email osman@magnafinancial.com
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