By Enrique Diaz-Alvarez, Chief Financial Risk Officer of International Payment Company Ebury

Markets seem to choose a more optimistic approach to the issue of duties, betting that the situation will be resolved without serious implications for the US economy. US brokerage indicators have recovered to the levels that were before the “Liberation Day”.

Although the dollar has not fully recovered, the rally of shares assists in stabilization his and prevents it from further declineat least over the main coins (G10). On the contrary, Asian coins were strongly strengthened, amid signs of decline in US -China trade discussions. Estimation that duties can only be reduced by current levels, coupled with the absence of serious evidence of the US “hard” macroeconomic elements, support one wider rally in Risk Assets– With the exception of the dollar.

In the absence of significant macroeconomic From the US, the course of coins this week will be determined by developments on trade negotiations and the meetings of two central banks – the US Federal Bank (FED) on Wednesday and the Bank of England on Thursday (Bank of England) -. The Fed is expected to maintain interest rates unchanged, while the Bank of England is expected to reduce them by 25 basis points. As always, any announcements will be decisive – especially in the case of the Fed, given the political pressure exerted by President Trump for interest rates.

Sterling

The market already has discount a interest rate reduction by Bank of England this week. The question is whether the mild rhetoric of the Monetary Policy Committee will be aligned with market expectations, which discounts total reductions of 100 meters. by the end of 2025 and a final rate close to 3%. The pound is lagging behind the rest of the coins lately, and we believe that any indication from the central bank that markets have excessively discounted the reductions could be a catalyst for currency over -performance. In addition, the United Kingdom’s low exposure to US duties and the strengthening of links with the EU are positive factors, which in our view have not been fully imprinted on exchange rates.

Euro

The Eurozone for the GDP growth of first quarter and inflation of Aprilpublished last week, exceeded expectations, complicating the narrative that the deflationary impact of duties is creating a space for significant new interest rate cuts by the ECB. The market discounts final interest rate at 1.5%, a case involving a strong further inflation, which today remains close to 3%. With unemployment in the eurozone steadily in historically low, the inflation of services being kept high at high levels and the possibility of a large fiscal stimulation in Germany, this scenario may be difficult to verify.

Dollar

The ‘hard‘ financial data in the US continue to show durability as compared to investigations. US employment surveys published last week were carried out just a week after the “Liberation Day” and may not fully imprint its implications. However, they remained positive, recording continuing – albeit moderately – job creation and steady unemployment rate just above 4%. On the other hand, the most recent and more volatile number of initial unemployment applications has shown an increase, although it remains low. Some other elements, such as GDP, are influenced by the mass promotions aimed at avoiding duties, and thus the overall image remains unclear.

Fed’s announcements this week on the rise of inflationary expectations and reducing confidence will be critical, as any aggressive tone will be perceived as resistance to President Trump’s pressure on President Powell.