Last week started positively for Sterling, with the Pound strengthening against most major currencies through the early part of the week. However, by Friday the tone had shifted. Sterling gave back ground against the US Dollar and edged lower against the Euro, reflecting a broader change in market sentiment rather than any single UK-specific shock.
A major driver was very weak US jobs data, which has effectively reopened the door for further Federal Reserve rate cuts in the months ahead. Markets are now much more confident that US interest rates will move lower sooner rather than later, which has helped cap Dollar strength despite occasional safe-haven demand. At the same time, geopolitical concerns around Venezuela appear to have been largely priced out. Attention has briefly turned to headlines involving President Trump and Greenland, but for now markets seem to be treating these as political noise rather than genuine economic risks.
Looking ahead, this week is a relatively busy one, although most of the action is concentrated into just three days. Both Monday and Friday are quiet from a data and central bank perspective, meaning liquidity and volatility are likely to pick up mid-week.
Tuesday’s focus is on US inflation. Headline CPI is expected to remain unchanged at 2.7%, while core inflation is forecast to rise slightly by 0.1%. As long as inflation behaves broadly as expected, this release is unlikely to move markets significantly. Any upside surprise, however, could challenge expectations for aggressive Fed easing later in the year. US new home sales are also released, although given their backward-looking nature, they are unlikely to influence FX markets meaningfully.
Wednesday brings one of the more important releases of the week with US retail sales. Forecasts point to a 0.4% increase, which would signal that consumer demand in the US remains resilient despite tighter financial conditions. This will be published alongside US PPI data, expected at 2.7%. Together, these figures will help shape expectations around inflation pressure and growth heading into the next Fed meeting.
Thursday is the key day for Sterling watchers. UK GDP for November is expected to show modest growth of 0.1%, an improvement on the previous reading but still indicative of a fragile economy. If GDP meets or slightly exceeds expectations, the Pound could see a supportive reaction. Any downside surprise, however, would likely weigh on Sterling given ongoing concerns about growth and fiscal pressure. The same day also brings US jobless claims and Eurozone industrial production, both of which could add incremental volatility to Dollar and Euro pairs.
Overall, while this week lacks headline-grabbing central bank decisions, the data flow still has the potential to shift short-term FX pricing. For anyone with upcoming currency exposure, particularly involving Sterling or the Dollar, it remains a market where timing and flexibility matter.
GBP/EUR 1.1500 GBP/USD 1.3454 GBP/AED 4.9436
GBP/AUD 2.00652 GBP/CHF 1.0707 GBP/CAD 1.8671
GBP/NZD 2.3369 EUR/USD 1.1684 GBP/ZAR 22.0823