19 May 2025

GBP

The United Kingdom and the European Union have reached a significant agreement on fishing and trade, marking the first major revision since the original Brexit deal in January 2020. Under the new arrangement, the UK has agreed to extend European fishing rights until 2028. In return, the EU will remove the majority of border checks on food and agricultural products, a move that is expected to ease trade friction and support cross-border commerce.

Economic data released last week painted a positive picture for the UK economy. Employment figures came in stronger than expected, highlighting continued resilience in the labour market. In addition, GDP growth also exceeded forecasts, coming in at 0.2%, suggesting that the UK economy is performing more robustly than previously anticipated.

Looking ahead, this week will bring several key data releases. On Wednesday, the Consumer Price Index (CPI), which is expected to tick up to 3.3%, will provide an update on inflationary pressures.

On Thursday, Purchasing Managers’ Index (PMI) data will offer insights into business activity across the manufacturing and services sectors. Finally, Friday’s retail sales figures will shed light on consumer spending trends heading into the summer and is expected to remain steady from last month at 0.4%.

EUR

In Portugal, political dynamics shifted over the weekend as far-right Chega party leader Andre Ventura gained momentum, with his party potentially overtaking the Socialist Party to become the second-largest group in Parliament. The centre-right coalition led by Prime Minister Luis Montenegro secured nearly 33% of the vote in Sunday’s snap election, although it fell short of an outright majority.

Meanwhile, in Romania, centrist candidate Nicusor Dan emerged victorious in the presidential runoff, defeating far-right contender George Simion with 54% of the vote. Simion, who has embraced a Trump-style political approach, had raised concerns among EU and NATO allies about Romania’s future alignment. Dan’s win is expected to reassure international partners and maintain Romania’s current geopolitical trajectory.

This week, the European Central Bank will publish its Financial Stability Review on Wednesday, which will be closely watched for any signals regarding systemic risks within the eurozone. On Thursday, PMI data will provide a timely update on the region’s economic momentum.

USD

Moody’s Investors Service downgraded the United States’ credit rating from Aaa to Aa1 on Friday, citing persistent fiscal deficits and rising interest costs as the primary reasons for the decision. The downgrade prompted a swift reaction in financial markets, with 30-year Treasury yields climbing to 5.02% on Monday morning—the highest level since November 2023. Equity markets also responded negatively, with the S&P 500 and Nasdaq falling by 1.3% and 1.7%, respectively.

US Treasury Secretary Scott Bessent sought to downplay the significance of the downgrade, describing Moody’s as a “lagging indicator” and suggesting that the market reaction may be overstated.

The downgrade followed a challenging week for US economic data. Both the Consumer Price Index (CPI) and Producer Price Index (PPI) came in below expectations, at 0.2% and -0.5% respectively, indicating a potential easing of inflationary pressures.

However, consumer sentiment deteriorated sharply, with the University of Michigan’s index falling to 50.8. Notably, inflation expectations among consumers rose to 7.3%, raising concerns about the public’s outlook on price stability.

This week, investors will be watching Thursday’s unemployment claims and PMI data, which is expected to drop slightly from last month, for further clues about the health of the US labour market and broader economic conditions.

Views expressed in this commentary are those of the author, and may differ from your appointed Moneycorp representative. This commentary does not constitute financial advice. All rates are sourced from Bloomberg and forecasts are taken from Forex Factory.