(MENAFN- Seven Media) Dubai, UAE, 14 October 2025: The dollar had its best week in months as political concerns hobbled the euro. However, the renewed trade war between the US and China threw a wrench across risk assets late Friday. Stocks fell sharply, government bonds rallied, and the dollar initially sold off modestly, only to stabilize and bounce back in early Monday morning trading in Asia. There were no clear patterns in currency markets, as most major currencies sold off against the dollar in tandem. However, the worst-performing currency was the Brazilian real, down almost 4% as fiscal jitters return.

Enrique DíazÁÁlvarez, Chief Economist at Ebury said: “The continuing US federal government shutdown means there will be no first-tier economic releases this week out of the US. The European calendar is also light. Focus should therefore remain on the reignition of the trade war between the US and China, as well as the possibility of an agreement to reopen the US government. The labor market report for August and payrolled employees for September in the UK will also merit some attentio”.”

GBP
In the UK, markets continue to scrutinize the fiscal picture, though the full 2026 budget will not be released until November 26th. Friday's risk aversion in markets supported the Gilt markets, as traders sold stocks and bought government bonds worldwide. Economic data is holding up reasonably well so far. This week's labor market report will provide a key check on the state of the UK economy, but we expect Sterling to continue to trade very much in line with the Euro for the time being.

EUR
Political noise in France was certainly one of the factors behind last week's dollar rally, as the euro has become the main alternative currency to the US dollar as a store of value and means of exchange. Although the worst outcomes (fresh elections and/or Macron resignation) have been avoided so far, the government's ability to pass a budget is very doubtful and may keep the euro on the back foot, as fiscal concerns become increasingly central to markets. Not much is on the docket next week, so the focus will probably remain on French politics.

USD
The lack of economic data because of the government shutdown makes it much harder to gauge the state of the US economy, and there is no end in sight for now. For now, markets don't seem to mind much, and appear far more worried about the flare-up of the US-China trade conflict. The US retaliated to China's imposition of right export controls on rare earths, in which it is almost the only supplier, with an additional 100% tariff on the country, though implementation is delayed until November 1st to allow some time for negotiations. The initial reaction to the news was to sell the dollar, which seems to confirm that investors do not regard trade wars as a dollar positive.

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