Last week proved to be supportive for Sterling, with an unexpected upside surprise in UK GDP data, showing that the economy grew rather than contracted in the last quarter. This positive momentum, coupled with uncertainty in U.S. markets, helped Sterling strengthen against most major currencies—particularly against the U.S. Dollar, where GBP/USD touched 1.26 on Friday afternoon.
However, political developments continue to cast a shadow over market stability. President Trump’s latest comments about imposing tariffs on countries that charge sales tax (VAT), including the UK, have injected fresh uncertainty into the markets. While these tariffs may not be entirely logical, they highlight Trump’s aggressive stance on trade policies. With reciprocal tariffs set to begin in April, we could see further pressure on the U.S. Dollar if markets react negatively to increased trade tensions.
What to Expect in the Markets This Week
Monday is set to be a quiet day, with no major economic data releases. However, volatility is expected to pick up significantly from Tuesday onwards.
Tuesday starts with the Reserve Bank of Australia (RBA) interest rate decision, where a 0.25% rate cut is expected. If confirmed, this should weaken the Australian Dollar (AUD). Later in the morning, the UK releases earnings and employment figures, where forecasts suggest stronger wage growth but a higher unemployment rate. While rising earnings are a positive sign, the increase in unemployment will likely overshadow the data, potentially putting pressure on Sterling. Later in the day, BoE Governor Andrew Bailey is scheduled to speak, though it’s unlikely that he will provide any major shifts in forward guidance. However, recent economic data suggests that the Bank of England is not in a hurry to cut interest rates, which could offer some support to GBP.
Wednesday brings a crucial set of UK data releases, beginning with inflation figures. Core inflation is expected to rise to 3.7%, reinforcing the case for the BoE to delay rate cuts. This will be released alongside Producer Price Index (PPI) and Retail Price Index (RPI) data, which could create a bullish scenario for Sterling sellers if the numbers come in stronger than expected. In the evening, the Federal Reserve will release the FOMC minutes, an event closely watched by USD traders. Markets will be searching for clues on when the Fed might start cutting rates, though the consensus remains that they will take a cautious approach.
On Thursday, U.S. jobless claims data and the Philadelphia Fed Manufacturing Index will be the key market movers. The manufacturing index is expected to be significantly lower than previous readings, which could weigh on market sentiment toward the U.S. Dollar. If the data disappoints, we could see USD weakness across the board.
Finally, Friday wraps up the week with UK retail sales data, forecasted to come in at 0.3% growth. If this holds true, it would reinforce Sterling’s resilience and could provide a boost to GBP exchange rates heading into the weekend.
Final Thoughts
This week is heavily Sterling and U.S. Dollar-focused, with major data releases likely to drive volatility between the two currencies. UK inflation and retail sales data will be key for GBP, while U.S. jobless claims, Fed minutes, and ongoing trade tensions could shift USD sentiment.
If you have any upcoming currency exchange requirements, now is the time to stay proactive and monitor the markets closely. Feel free to reach out for guidance on navigating this week’s volatility.