Geopolitics once again dominated weekend headlines, with U.S.–Iran talks still stuck on the runway and an attempted attack on President Trump at the White House Correspondents’ Dinner adding to an already fragile political backdrop in the U.S.
While the two-week ceasefire with Iran technically remains in place, confidence around it is clearly weakening. Planned talks in Islamabad were cancelled at short notice, and Trump has continued to combine temporary extensions of the truce with aggressive rhetoric around targeting Iranian infrastructure. This mix of diplomacy and escalation is leaving markets uneasy, particularly given how quickly the situation could shift. Any breakdown risks reigniting tensions and, more importantly, disrupting flows through the Strait of Hormuz, a key artery for global energy supply.
In contrast, the UK has offered a rare pocket of relative stability. February GDP was revised higher, March inflation surprised to the upside, and labour market indicators are beginning to stabilise. Together, this pushes back against the narrative of aggressive Bank of England rate cuts and has helped provide a degree of support to Sterling, despite the broader global uncertainty.
A Week Packed with Catalysts
Looking ahead, this week has all the ingredients for elevated volatility. Not only do we have a heavy economic calendar, but there are also five central bank decisions and a cluster of major corporate earnings from the “Magnificent 7,” including Microsoft, Amazon, Meta, Alphabet and Apple. That combination means both FX and equity markets are likely to be highly reactive.
Importantly, while the central bank decisions themselves are widely expected to result in no changes, the real focus will be on forward guidance. With markets reassessing the path of interest rates globally, even subtle shifts in tone could drive significant moves.
Key Data and Central Bank Watch
Tuesday begins with the Bank of Japan decision, where rates are expected to remain on hold at 0.75%. The BoJ remains a slow-moving central bank, but any shift in tone around normalisation could have broader implications for global yields and currency flows. Later in the day, U.S. consumer confidence is expected to edge lower to 89 from 91.8, a sign that sentiment is beginning to soften, which aligns with a more cautious outlook for growth.
Wednesday brings German flash CPI, expected to rise to around 3%, in line with broader global inflation pressures. The main focus, however, will be on the Bank of Canada and Federal Reserve decisions. Both are expected to keep rates unchanged, but the messaging will be crucial.
For the Fed in particular, the challenge is becoming more complex. Inflation remains elevated, energy prices are rising, and geopolitical risks are adding further uncertainty. At the same time, political pressure for lower rates continues to build, especially with a potential change in Fed leadership on the horizon. The Fed is therefore walking a tightrope, and any signal that it is leaning toward keeping rates higher for longer, rather than cutting, could provide support to the U.S. Dollar.
Thursday is another key day, starting with Eurozone GDP, flash CPI and unemployment data. Growth is expected to remain modest at around 0.2%, while inflation is forecast to rise toward 3%, and unemployment is expected to hold steady at 6.2%. This combination of low growth and rising inflation creates a difficult environment for policymakers.
Later in the day, both the Bank of England and the European Central Bank announce their decisions. No changes are expected from either, but again, the focus will be on guidance. With inflation pressures re-emerging, particularly due to energy costs, both central banks may be forced to signal a more cautious approach to rate cuts than previously expected. In other words, the idea of imminent easing is fading, and markets are beginning to price a longer period of restrictive policy.
Final Thoughts
This is shaping up to be a week where multiple forces collide.
Geopolitical risk remains the dominant theme, with the U.S.–Iran situation still highly unstable and capable of driving sudden market moves. At the same time, central banks are navigating a more complicated inflation backdrop, where energy prices and global uncertainty are making policy decisions less straightforward.
Overlay that with major corporate earnings and a heavy data calendar, and it becomes clear why volatility is likely to remain elevated.
For FX markets, this creates a particularly challenging environment. Moves are likely to be driven by shifts in expectations rather than clear trends, with currencies reacting quickly to both headlines and data surprises. The U.S. Dollar will continue to balance safe-haven demand against interest rate expectations, while Sterling and the Euro will remain sensitive to both domestic data and global developments.
As we’ve seen repeatedly over the past few weeks, this is not a market where complacency is rewarded. Staying flexible, watching key events closely, and being prepared for sudden shifts will be critical in navigating the days ahead.
GBP/EUR 1.1521 GBP/USD 1.3534 GBP/AED 4.9762
GBP/AUD 1.8860 GBP/CHF 1.0613 GBP/CAD 1.8447
GBP/NZD 2.2942 EUR/USD 1.1731 GBP/ZAR 22.3345