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What’s happening: The British pound edged higher on Friday, but recorded losses for the week, ahead of a key tariff deadline from the US.
What happened: The sterling remained under pressure last week with fiscal and political concerns impacting market sentiment.
The latest economic data releases also lent support to the GBP/USD forex pair on Friday.
Why it matters: Investors remained cautious about UK assets last week after the Parliament passed a controversial bill on Tuesday evening despite threats of a major rebellion.
Data released on Friday showed that the S&P Global UK construction PMI rose to 48.8 in June, from 47.9 in the previous month. New car sales in the UK surged 6.7% year-over-year to 191,316 units in June, notching growth for the second consecutive month and the best June performance since 2019.
Meanwhile, US President Donald Trump said that his administration will start sending letters to trading partners disclosing unilateral tariffs, with rates ranging from 10% to 70%, scheduled to take effect on August 1. Trump had set July 9 as the deadline to strike trade agreements to avoid these tariffs.
Weakness in the US dollar also lent support to the GBP/USD forex pair on Friday. The US dollar index, which measures the greenback’s performance versus a basket of major peers, fell 0.2% to 96.99.
The GBP/USD rose slightly to 1.3654 on Friday, but shed around 0.4% last week. The forex pair slipped around 0.1% this morning. The EUR/GBP forex pair also slipped to 0.8628.
Meanwhile, London’s FTSE 100 fell 0.003% to close at 8,822.91 on Friday, while the more domestically focused FTSE 250 declined 0.67% to settle at 21,557.34.
What to watch: Investors will continue monitoring trade deal and tariff-related announcements.
Data on GDP growth, industrial production and balance of trade will be released on Friday. The UK economy, which expanded by 0.9% year-over-year in April to record the smallest growth in 10 months, is expected to grow by just 0.5% in May. Analysts expect industrial production in the UK to grow by 0.4% in May, following a 0.6% decline in April, while UK’s trade deficit is expected to narrow to £6 billion in May, from £7.03 billion in the previous month.
Context: Japan’s stock market fell this morning, after closing slightly higher on Friday, as investors digested the latest economic reports.
Details: Japan released better-than-expected economic reports, which fuelled speculations of a more hawkish approach from the Bank of Japan.
Household spending surged 4.7% year-over-year in May, recovering sharply from a 0.1% decline in the previous month. The figure also topped market estimates of a 1.2% rise. The recent increase in spending signalled Tokyo’s efforts to boost domestic consumption.
Renewed concerns over Trump’s tariff policy impacted overall market sentiment on Friday. US President Trump had earlier warned to increase tariffs on imports from Japan to as much as 35%.
Japan’s Nikkei 225 gained 0.06% to close at 39,810.88 on Friday.
Data released this morning showed nominal wages in Japan rose by only 1% year-over-year in May, slowing for the third straight month and falling short of market estimates of a 2.4% gain.
Japan’s stock market started the week on a lower note, with the Nikkei 225 index falling around 0.5% this morning.
What to watch: Investors await the release of economic data on Japan’s current account (0350 UAE Time), bank lending (0350 UAE Time) and Eco Watchers survey current (0900 UAE Time) on Tuesday. Japan’s current account surplus had widened to ¥2,258 billion in April, from ¥2,188 billion in the year-ago period. The country is expected to record a wider surplus of ¥2940 in May.
Analysts expect Japan’s value of loans to rise by 2.3% year-over-year in June, following a 2.4% gain in May, while the gauge for Japan’s service sector is projected to rise to 45.2 in June, from 44.4 in the previous month.
Other Markets: US trading indices closed higher on Thursday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 0.77%, 0.83% and 0.99%, respectively.
After speaking with Ukraine’s President Volodymyr Zelenskyy, US President Donald Trump said that the country would need Patriot missiles for its defence against Russia. The news sent the RUB/USD lower in forex trading this morning.
Vietnam’s GDP grew by 7.96% year-over-year in the second quarter, following a 6.93% gain in the previous quarter. The region’s GDP expanding at the fastest pace since the third quarter of 2022 lent support to the VND/USD forex pair.
Brazil’s trade surplus narrowed to $5.89 billion in June, from $7.02 billion in the previous month. The latest reading coming in short of market estimates of $6.45 billion sent the BRL/USD pair lower in forex trading this morning.
Canada’s S&P Global services PMI declined to 44.3 in June, from 45.6 in the previous month. The region’s services activity contracting for the seventh month in a row exerted pressure on the CAD/USD forex pair.
Australia’s ANZ-Indeed Job Ads rose by 1.8% in June, following a 0.6% decline in the previous month. However, the AUD/USD pair slipped in forex trading this morning.
Eurozone’s retail sales (1300 UAE Time), Singapore’s foreign exchange reserves (1300 UAE Time), Mexico’s auto exports (1600 UAE Time), France’s 12-month BTF auction (1700 UAE Time), 3-month BTF auction (1700 UAE Time) and 6-month BTF auction (1700 UAE Time), Russia’s foreign exchange reserves (1700 UAE Time), Brazil’s car production (1800 UAE Time) and new car registrations (1800 UAE Time), Turkey’s treasury cash balance (1830 UAE Time), as well as US 3-month Bill auction (1930 UAE Time) and 6-month Bill auction (1930 UAE Time).
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