🇬🇧 Pound Recovers Late, but Political Risks Weigh on Outlook
Sterling edged higher on Friday, recovering a small portion of its recent losses against both the US dollar and the euro as selling pressure began to unwind. GBP/USD starts the week near 1.36, following an overall decline of around 0.6% last week, while GBP/EUR opens near 1.15 after posting similar losses. Despite Friday’s rebound, both pairs begin the new week on the back foot. The late-week recovery offers only limited near-term relief, as analysts remain increasingly cautious on the pound’s broader outlook amid heightened domestic political uncertainty and growing expectations of further Bank of England rate cuts.
Political risk intensified last week following a contentious session in the UK Parliament, during which the Prime Minister acknowledged he was aware of damaging information about Peter Mandelson prior to appointing him as ambassador to the United States. Pressure on Sir Keir Starmer continues to build, with reported internal dissent within the Labour Party. For markets, the concern is clear, the rising risk of a leadership change, potentially towards a more radical, fiscally expansive alternative. This theme has surfaced repeatedly in recent years and remains a factor markets are increasingly sensitive to when assessing the future of GBP.
🇺🇸 Dollar Pulls Back Late but Ends Week Firm
In recent months, questions have resurfaced around the US dollar, yet the speed at which it can rebound against the Pound and the Euro highlights how quickly market fears over US policy and reserve-currency status can unwind. This pattern has been evident during President Trump’s second term, which has been marked by bouts of heightened volatility.
The Dollar eased from two-week highs on Friday, surrendering some of its safe-haven gains as risk assets rebounded broadly. Even so, the greenback ended the week stronger than Sterling and remained broadly unchanged against the Euro. Meanwhile, ongoing uncertainty surrounding the US government shutdown continues to weigh on sentiment. Last week’s non-farm payrolls report was delayed until Wednesday, setting the stage for a heavy US data week that is likely to keep the Dollar’s volatile trading conditions firmly in place.
🇪🇺 Euro Builds Momentum Against Pound, Eyes Further Upside
The Euro posted solid gains against Sterling last week, rising around 0.6%, and extended that strength into Monday’s opening session with a further near 0.5% advance. Meanwhile, EUR/USD was broadly unchanged over the past week, but has opened the new week on a firmer footing, trading just below the 1.19 level. Renewed political uncertainty in the UK, with Keir Starmer appearing increasingly vulnerable, adds to downside risks for Sterling and leaves room for further Euro gains in the near term. Against the Dollar, longer-term concerns surrounding the US fiscal outlook, unpredictable trade policy, and policymaking that weakens institutional checks and balances continue to raise questions over the Dollar’s long term structural appeal. Together, these factors keep the Euro well supported against key counterparts.
This Weeks Market Moving Data
This week’s key data releases are centred on the US, with Wednesday’s delayed non-farm payrolls and labour market report set to be the main focus for markets. US retail sales on Tuesday will also be closely watched for signs of consumer resilience. In the UK, the primary release is Thursday’s GDP data, which will offer an important update on domestic growth momentum.
Tuesday 10th February
US Retail Sales Data Release
US Retail Sales data is a key economic indicator of consumer spending, as it measures the value of goods sold by retailers directly to consumers. A strong reading is generally viewed as bullish for the dollar, signalling resilient consumer demand, while a weak reading is seen as bearish, raising concerns about slowing economic momentum.
Wednesday 11th February
US Nonfarm Payrolls Release
The US Nonfarm Payrolls report is one of the most influential indicators of American economic health, showing whether job creation is accelerating or cooling. Because it heavily shapes Federal Reserve interest-rate expectations, the release can trigger significant moves in the US dollar as markets react to the labour market’s strength or weakness.
Thursday 12th February
GBP Gross Domestic Product
UK monthly GDP is significant as it shapes expectations for domestic growth and is a key indicator for how quickly the Bank of England can ease policy. A stronger than expected print typically supports sterling by reducing near-term rate-cut pricing, while a weaker reading can pressure GBP as markets lean more dovish on the BoE.
