🇬🇧 Pound Faces Mounting Pressure from Global Volatility and UK Political Risks

Last week, the Pound ended on a weaker footing, with the Easter Bank Holiday period coinciding with Thursday’s notable GBP losses. These declines appear to reflect a broader deterioration in global market sentiment, as equities pulled back from recent rebound highs and oil prices resumed their upward trend.

GBP/EUR has now been on a downward trajectory for three consecutive weeks, with the pair turning decisively bearish since mid-March. With only a month to go, concerns around domestic political risks are beginning to resurface. A key concern is the possibility of a Labour government adopting increasingly expansionary fiscal policies in an effort to regain voter support. Such measures could exacerbate the UK’s debt outlook, placing pressure on government bonds and, in turn, weighing on Sterling.

As a result, any upward moves in the Pound may remain limited. That said, like most global currencies and risk assets, Sterling continues to be heavily influenced by developments in the United States, particularly policy direction under President Trump. Cable starts the week just above 1.32, while GBP/EUR sits around 1.14.

🇺🇸  Geopolitical Tensions Surge, Sending Dollar and Oil Higher

In recent weeks, the risk of escalation in the Middle East has become increasingly prominent. Against this backdrop, the US Dollar has remained firmly in control. It has reversed recent losses against major counterparts ahead of the Easter weekend, supported by a continued bullish trend in oil prices and rising geopolitical uncertainty. As fears of further escalation persist, the Dollar continues to strengthen. For now, global markets remain on edge, closely watching for the next move from the US.

🇪🇺 Euro Extends Gains Against Sterling as ECB Signals Caution

Regarding the Euro, as noted previously, it has now gained against Sterling for three consecutive weeks, and given the current geopolitical backdrop, that trend may continue. However, this move is less about underlying Euro strength and more a reflection of pressure on the Pound.

On the monetary policy front, the ECB remains cautious. Governing Council member Yannis Stournaras, who is also Governor of the Bank of Greece, said at the Bank of Greece’s annual shareholders’ meeting in Athens that if the recent spike in energy prices proves temporary, the need for any monetary policy adjustment will be limited. Against the US Dollar, the Euro remains under pressure, with EUR/USD opening the week around 1.15.

This Week’s Market Moving Data

Once again, currency markets are likely to be driven primarily by developments in the Middle East, with traders closely monitoring any comments from President Trump for further signals of escalation.
From a data perspective, the key focus will be on the United States, with GDP figures due on Thursday followed by inflation data on Friday, both of which have the potential to move markets. In the Eurozone, attention will turn to retail sales data on Wednesday, while the UK faces a relatively quiet week on the economic calendar.

Wednesday 8th April 

Eurozone Retail Sales Data

Eurozone retail sales data is a key indicator of consumer spending, measuring the value of goods sold by retailers across the bloc. A strong reading is typically seen as supportive for the euro, signalling resilient consumer demand and economic activity, while a weaker result may weigh on EUR by raising concerns over slowing growth in the region.

Thursday 9th April

US Gross Domestic Product (GDP) Data

US GDP is a key indicator of economic growth and plays an important role in shaping expectations for Federal Reserve policy. A stronger-than-expected reading typically supports the Dollar by reducing expectations of near-term rate cuts, while weaker growth can pressure USD as markets anticipate a more dovish stance from the Fed.

Friday 10th April

US Consumer Price Index (CPI) Data

US CPI is a key measure of inflation, tracking changes in the prices of goods and services across the economy. It plays a crucial role in shaping expectations for Federal Reserve policy. A higher than expected reading typically supports the Dollar, as it may prompt a more hawkish stance from the Fed, while a softer reading can weigh on USD by reinforcing expectations of rate cuts.