Fiscal Concerns
GBP: The British Pound regained ground after Prime Minister Keir Starmer publicly backed Chancellor Rachel Reeves, calming markets shaken by political uncertainty. Sterling was further supported by stronger than expected UK services PMI data. However, with little UK economic data due today, the Pound’s movement may depend on broader market sentiment. Ultimately, fiscal concerns and potential autumn tax hikes still pose risks to GBP’s longer-term outlook.
EUR: The Euro traded cautiously as weak German factory orders and a forecast decline in producer price inflation signalled economic softness. While June’s services PMI rose slightly to 50.5, it still reflects stagnant activity. Attention now turns to ECB President Lagarde – if she signals steady interest rates after inflation hit 2%, the Euro may gain. However, falling producer prices could renew disinflation concerns and pressure the Euro.
USD: The U.S. Dollar traded cautiously ahead of today’s key non-farm payrolls data release, which could influence future Federal Reserve rate decisions. A strong jobs report may boost the Dollar by reducing expectations for a September rate cut, while a weak print could weigh on it. Moreover, uncertainty also lingers over U.S. fiscal policy, with markets watching the impact of Trump’s new spending bill.
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