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

The dollar had the best week of recent months, as political concerns weakened the euro. However, the resuscitation of the US and China trade war overturned the climate towards the end of Friday, causing a sharp decline in shares, rising government bonds and a temporary correction of the dollar, but stabilized and rebuilt in Monday’s morning transactions. There were no clear trends in currency markets, as most of the main coins fell over the dollar. The biggest blow was the Brazilian Real, which fell nearly 4%, as concerns about the country’s fiscal stability came back.

The ongoing suspension of the US Federal Government (Government Shutdown) means that there will be no significant macroeconomic announcements this week. The European calendar is also limited. Market attention is expected to remain on the resumption of the US -China trade confrontation, as well as the possibility of an agreement on the US government’s reopening. At the same time, the data on the August labor market and September’s employment and payroll in the United Kingdom will draw part of attention.

Sterling

In the United Kingdom, the market continues to focus on the fiscal image, although the full budget of 2026 is expected to be presented on November 26. Increased Friday risk aversion favored British government bonds (GILTS), as investors moved capital from the safest shelters. Financial data continue to show durability, with no signs of abrupt deceleration. The forthcoming report on the labor market will be a critical test for the economy in the United Kingdom, but for the time being the pound seems to be moving in full correlation with the euro.

Euro

Political uncertainty in France has been one of the main factors of the dollar rise last week, as the euro remains the main alternative coin over the US currency as a repository of value and a means of transaction. Although the most unfavorable scenarios – such as new elections or Macron’s resignation – have been avoided, the government’s ability to approve a budget remains extremely doubtful. Concerns about public finances seem to have a central role in the investment climate, keeping the euro under pressure. Given that next week is poor on economic elements, interest will again focus on the French political scene.

Dollar

The lack of financial data due to the Government Shutdown is difficult to assess the course of the US economy, but there are no signs of concern in the markets. Investors are more concerned about the resuscitation of the trade confrontation with China. The US has responded to Chinese restrictions on rare land exports – a man who has almost a monopoly – with the imposition of an additional 100%duty, but the application was postponed by November 1, leaving a margin of negotiations. The initial market reaction was down to the dollar, indicating that investors do not consider trade wars a positive factor for the US currency.