Last week delivered another tough run for Sterling, with the Pound sliding against most major currencies. The weakness has less to do with a dramatic shift in economic fundamentals and more with mounting nerves around the upcoming UK Budget. Until the Chancellor outlines a clear fiscal path, markets are choosing caution – and that means GBP remains vulnerable for now.
There was at least one encouraging development on the geopolitical front. The Trump–Xi meeting concluded on a positive note, with both sides signalling progress toward a trade deal. But given how quickly rhetoric has shifted in recent weeks, it’s sensible to treat optimism with a degree of restraint. Markets are willing to believe in progress – but they aren’t banking on it yet.
Complicating matters further is the ongoing US Government shutdown, which means parts of the US data calendar remain blacked out. Notably, unless a resolution is reached very soon, we are unlikely to see Non-Farm Payrolls this Friday, usually one of the month’s most influential releases. For traders, that removes a layer of visibility and adds another reason to stay nimble.
What to Expect This Week
This week brings a steady flow of central bank activity, although none are expected to shift policy just yet. Instead, the focus will fall on tone and guidance.
We kick off with global manufacturing data, covering the UK, Europe and the US. The UK and Eurozone are expected to remain broadly flat, but the US print may show a slight improvement. If that’s the case, the Dollar could start the week with a positive bid.
Attention then shifts to Australia, where the RBA announces its latest policy decision. The broad expectation is for rates to remain unchanged, but given recent shifts in the domestic picture, traders will be alert to any hint of dovishness. A surprise cut is not the base case – but can’t be completely ruled out – meaning AUD pairs are worth watching closely.
Midweek, Europe and the UK deliver services-sector data alongside US ADP employment figures. These tend to set the tone ahead of payrolls, though the impact may be muted given the shutdown backdrop.
The Bank of England will be front and centre on Thursday. Consensus expects no change in rates, but market whispers – including a call from Goldman Sachs suggesting the BoE could move sooner – mean this meeting carries more weight than usual. With confidence fragile and Sterling already on the back foot, even a subtle shift in tone could move the currency sharply.
A Market Still Driven by Politics
With the Budget approaching and Washington still locked in negotiations, risk sentiment remains fragile. For Sterling, rallies are likely to be capped until fiscal clarity arrives. For the Dollar, shutdown-driven uncertainty sits in tension with a still-resilient domestic economy – making it difficult for markets to take a clear directional stance.
In short, we enter the week without a major catalyst, but with plenty of political noise and sensitivity to data and central bank messaging. These are the weeks where a disciplined strategy pays off: staggered execution, orders in the market, and protection against surprise swings can make a significant difference.
GBP/EUR 1.1383 GBP/USD 1.3112 GBP/AED 4.8184
GBP/AUD 2.0019 GBP/CHF 1.0572 GBP/CAD 1.8397
GBP/NZD 2.2934 EUR/USD 1.1503 GBP/ZAR 22.6998