The final days of July brought increased volatility in the markets, driven on one hand by the hawkish stance of the Fed, and on the other by strong earnings from Big Tech companies. A key event in the first days of August will be the monetary decision of another central bank – the Bank of England. Additionally, quarterly reports will be published by more companies from the technology, traditional economy, and industrial sectors.
Regarding geopolitical issues, the situation surrounding tariffs is beginning to clarify in some cases, while in others – such as in Canada – it is becoming more complex. As a result, in the upcoming week, it is worth paying attention to EURGBP, US500, and USDCAD.
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The British pound has come under selling pressure in recent weeks. GBP weakness is visible even against the euro, which itself is under pressure due to an unfavorable trade deal with the U.S. Next Thursday, we will learn the Bank of England's monetary decision, and after a pause in June, market participants expect a return to the rate-cutting cycle.
Although a rate cut by the Bank of England is likely, it is not certain, and this uncertainty may lead to increased volatility during the announcement and the subsequent press conference. The main source of uncertainty is the rise in CPI inflation in June to 3.6% YoY – the highest level since January 2024 and nearly double the 2% target.
Governor Bailey insists that while the BoE "remains in a cutting cycle," these cuts must be implemented "gradually and cautiously," suggesting a conservative tone in light of mixed data. Investors will closely watch for potential dissent in voting and for Governor Andrew Bailey’s guidance on the pace of future cuts. A lack of market conviction may cause larger moves in the EURGBP pair on the day of the BoE's August decision.
US500
The U.S. stock market entered a correction phase for the first time since the end of May, triggered by the Fed's hawkish tone. Following last week's FOMC press conference, investors are becoming less hopeful about continued Fed rate cuts.
However, fundamentals remain strong due to the impressive earnings of Big Tech companies, which have supported bullish sentiment for some time. In the upcoming week, more earnings reports will be released – including from companies such as AMD, Palantir, Arista Networks, Uber, Shopify, Disney, and McDonald's.
Of course, investors will also be watching U.S. ISM and PMI reports, as well as further updates on trade negotiations. Given the record-high valuations and the looming risk of a deeper correction, it will be worth closely monitoring the US500 index in the days ahead.
USDCAD
The Canadian dollar has recently shown particular weakness. Another blow came when Trump announced even higher tariffs on Canada. The key date in this context is August 8, when the new regulations come into effect.
The new U.S. “reciprocal tariffs” system will raise tariffs on most Canadian goods to 35%. On Friday, Canada’s labor market report will be released, which could confirm that worsening trade conditions are making companies less willing to create new jobs.
Although Prime Minister Mark Carney emphasizes the importance of dialogue to prevent further escalation, Ottawa is expected to announce a proportional list of retaliatory tariffs in the coming days. Given recent and upcoming developments, the USDCAD pair is one to watch closely.
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