Tariffs, market shifts and potential volatility for the euro

Here’s the latest currency news from our partner Moneycorp, to help you find out what your money is worth.

GBP

It’s another quiet week on the UK data front, but that hasn’t stopped the pound from coming under pressure. Since President Trump’s surprise tariff announcement last week, markets have shifted into risk-off mode, favouring safer assets and putting the pound on the back foot.

The pound sterling index (BXY) has dropped 2.2% since the news broke, while GBP/EUR has slid to its lowest level in eight months, touching levels last seen in August 2024. GBP/USD has also declined, falling by 3.5 cents and returning to the average range seen in recent weeks.

Outside of the UK, attention turns to New Zealand, where the Reserve Bank of New Zealand (RBNZ) is expected to cut interest rates by 25bps on Wednesday, from 3.75% to 3.5%. This could put further pressure on the New Zealand dollar, which is already trading near a 10-year low against the pound.

EUR

The euro got off to a strong start this week with a better-than-expected EU retail sales release, which rose from 1.8% to 2.3%. This may provide some short-term support for the single currency ahead of a data-heavy end to the week.

On Friday, Germany releases its CPI figures, which are forecast to remain steady at 2.2%. The main event for the euro, however, will be ECB President Christine Lagarde’s speech later that day. Markets will be watching closely for any shift in tone – a dovish or cautious outlook could trigger further volatility for the euro.

Despite the turbulence, EUR/USD continues to trade strongly. After hitting a 7-month high last week in the wake of Trump’s tariffs, the pair has pulled back slightly but still sits 2% higher than it was two weeks ago, presenting a potentially favourable window for euro sellers.

USD

There could be extra sensitivity to market data this week in light of the current bear market caused by the Trump tariffs announced last week. Although there is more market data released this week than last week, tariffs could still be the primary driver in the FX markets.

The US dollar enters a critical week as markets navigate the fallout from the newly announced trade tariffs. With the US now at the centre of escalating trade tensions, all eyes are on the next FOMC meeting on Wednesday 7th May. President Trump has publicly called for lower interest rates to offset the impact of tariffs, putting added pressure on the Federal Reserve.

Thursday’s US CPI is expected to ease from 2.8% to 2.6%, supporting the case for potential rate cuts. However, this could be challenged by Friday’s PPI data – the Fed’s preferred inflation measure – which is forecast to rise from 3.4% to 3.6%, potentially complicating the policy outlook.

Adding to the mix, the University of Michigan Consumer Sentiment Index, also due Friday, is forecast to fall from 57 to 54.5. With uncertainty already in the global markets, a sharper-than-expected decline in consumer confidence could further weigh on investor sentiment.