Euro, Pound Consolidate Against Dollar Ahead of Trade Turmoil Next Week

Modified: Sunday, 6 July 2025 16:30 BST - Written by Ben Hughes

STORY LINK Euro, Pound Consolidate Against Dollar Ahead of Trade Turmoil Next Week

Trading conditions were inevitably subdued on Friday given the US Independence Day holiday, although equities had a softer tone which hampered the Pound in global markets.

Markets are braced for further news on US trade tariffs during the next few days while uncertainty surrounding Fed independence and reservations over the US fiscal outlook is liable to trigger fresh volatility next week.

The Pound to Dollar (GBP/USD) exchange rate hit highs just above 1.3680 before subsiding to 1.3640.

According to Scotiabank’s chief FX strategist Shaun Osborne; “the GBP/USD trend is bullish but momentum has softened and we note that the RSI continues to drift toward the neutral zone around 50.”

He added; “we look to a near-term trading range bound between 1.3600 support and 1.3780 resistance.”

The Euro to Dollar (EUR/USD) exchange rate settled around 1.1765 after failing to challenge 1.1800.

ING commented; “Expect EUR/USD to trade well within yesterday's 1.1810 to 1.1720 range today. But the dollar will remain vulnerable over the weekend to news of higher tariff rates coming in again.”

Trade uncertainty will dominate initially with President Trump stating that he will start announcing tariff levels for individual countries.

The Administration has suggested that tariffs will be in a 10-20% or 60-70% range, but there have been no details and no fresh deals announced.

Inevitably, the Administration will look to put a favourable spin on any framework announcements.

ING commented; “Needless to say this could be a noisy period for FX markets as the White House again makes heavy threats in order to get trade deals over the line.”

According to Scotiabank; “The uncertainty of who and how much adds to USD headwinds following yesterday’s data. The USD gained briefly in response to the better than consensus employment report but the rise failed to stick for the most part and the DXY retains a soft undertone overall.”

ING added; “If Trump’s comments prove accurate then investors will again begin to downgrade growth expectations and upgrade inflation expectations which will only encourage further dollar selling.”

Danske Bank also pointed to a high degree of uncertainty; “We do not expect the US to reimpose majority of the country-specific rates announced on April 1st next week. Some countries, where negotiations have stalled or are progressing slowly, could face temporary increases as Trump’s negotiation tactic. But as before, tariffs could again be lowered quickly when the final agreement is struck.”

The House of Representatives passed the Budget Bill on Thursday after an all-night session.

The prospect of tax cuts being extended could underpin US demand and support the dollar, but deficit concerns could explode at any time, especially if the economy loses traction.

BMO Capital Markets senior economist Jennifer Lee commented; "We are expecting a weaker U.S. dollar in the coming months."

She added; "The recent budget, the inflationary impact tariffs are going to have and what that means for the Federal Reserve, and the pointed comments President Trump is using against Fed Chair Jerome Powell - all of that doesn't bode well for the overall U.S. economic outlook at least over the rest of the year."

Bank of America FX strategist Alex Cohen also has a bearish slant; “We continue to watch this slower burn story of real money and a consistent selling of the dollar, particularly from European real money."

He added; "That just speaks to more structural reasons for the dollar to continue to grind lower in the coming months."

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TAGS: Euro Dollar Forecasts Pound Dollar Forecasts