• Trump indicates openness to a potential trade agreement with China.

• Key UK economic data scheduled for release this week.

What Moved the Markets Last Week?

The US dollar faced heavy selling late Friday after Trump announced plans for major tariff hikes in retaliation to China’s new port fees on US vessels and its probe into Qualcomm. The yen strengthened on the back of this dollar weakness.

In Europe, French President Macron reshuffled his cabinet over the weekend, reappointing Sebastian Lecornu as prime minister in an effort to stabilise the political environment and advance the upcoming budget.

Markets are finding their footing this morning after Friday’s sharp selloff. Equities have recovered some ground, and the USD has steadied as the Trump administration signalled a willingness to reopen dialogue with China.

Analysts at Goldman Sachs expect a gradual improvement in US–China relations, with both sides likely to maintain a cooperative tone and extend the current tariff freeze from May.

In the UK, this week’s data points to a mixed economic backdrop. The labour market appears to be stabilising, but wage growth continues to cool, slipping to 4.5% in the three months to August. GDP is projected to rise only slightly — around 0.1% for the month — as fiscal constraints and political uncertainty weigh on momentum. With employment steady but not strong, the Bank of England is expected to remain on hold for the remainder of 2025.

Across Europe, inflation remains stubbornly above target, with headline CPI at 2.2% and core inflation holding at 2.3%. This reinforces the European Central Bank’s cautious stance on rate reductions.

Given softening UK data and limited room for policy easing, sterling remains on the back foot — particularly against the USD and EUR, where inflation risks and relative growth strength continue to support those currencies.

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