)
GBP - Policy Signalling & Political Risk in Focus
Sterling enters the week supported, but exposed to two near-term catalysts with potential to reprice rate expectations and political risk.
First, testimony before the Treasury Select Committee from Andrew Bailey and MPC member Megan Greene will be scrutinised for any shift in tone ahead of the 19 March decision. Markets are currently pricing a 20bp easing; explicit alignment with the rate-cutting camp would likely firm expectations toward a full 25bp move. For CFOs managing Sterling liabilities, this remains a live pricing inflection point.
Second, Thursday’s Gorton and Denton by-election introduces political event risk. A material setback for the incumbent Labour government would revive leadership speculation and could reintroduce a modest political risk premium into Sterling. GBP/EUR demand has been resilient, with positioning suggesting the cross could approach the €1.1364 area should sentiment deteriorate.
GBP/USD has stabilised near $1.3520 after testing four-week lows last week. The recovery has been driven less by domestic factors and more by renewed uncertainty surrounding US trade policy. The US Supreme Court’s decision to strike down former President Donald Trump’s global tariff framework, followed by the announcement of a blanket 15% import levy, has unsettled the Dollar complex. Markets are reassessing the durability of US trade architecture and its macro implications.
Stronger-than-expected UK PMI data and a return to retail sales growth have reinforced the perception that the UK economy retains underlying resilience. This has limited downside in GBP crosses for now.
Attention later this week turns to US PPI (consensus: +0.3% headline and core). A stronger print would likely support the Dollar and compress GBP/USD gains. For corporates with USD payables, the balance of risk remains two-sided and tactically sensitive to US inflation surprises.
Weekly Data:
24th February
2:15pm - Monetary Policy Report Hearings
EUR - Relative Stability, But Upside Requires Conviction
EUR/USD continues to edge higher, trading around $1.1820, despite uneven global risk sentiment. The underlying narrative remains constructive: Eurozone business sentiment is gradually improving, and the consensus view is that the EU is unlikely to face materially worse trade terms than currently embedded in pricing.
Today’s German Ifo survey is expected to show a modest improvement in expectations. However, only a material upside surprise - toward last year’s highs - would materially alter the near-term trajectory for the Euro.
From a technical perspective, EUR/USD remains above its 50-day EMA, preserving a supportive medium-term bias. Momentum indicators have stabilised near neutral. A sustained close above the short-term moving average would reinforce the constructive tone and open a path toward the $1.1850–$1.1880 region. A decisive move beyond $1.1900, however, appears premature given residual geopolitical risk and fragile global risk appetite.
Downside levels to monitor remain clustered around $1.1775 (50-day EMA), with a break lower exposing the January trough near $1.1578.
For Euro-based treasurers, the current environment is characterised by orderly appreciation rather than impulsive repricing. Liquidity remains deep, but conviction flows are limited. Execution strategy should remain disciplined rather than reactive.
Weekly Data:
27th February
German Prelim CPI m/m
Weekly Speeches:
23rd February
5:30pm - ECB President Lagarde Speaks
26th February
8:30am - ECB President Lagarde Speaks
USD - Trade Policy Uncertainty Weighs On Dollar Confidence
The Dollar begins the week on softer footing. While the absence of a US military strike on Iran removed an immediate haven bid, the more material driver is renewed uncertainty around US trade policy.
The shift to a 15% Section 122 import surcharge replaces the prior regime of variable tariff levels. This resets relative trade advantages: countries such as China and Brazil may face lower effective rates, while previously negotiated arrangements - including those with the UK and Australia - lose preferential treatment. Several trading partners are now reviewing their positions, with EU-US negotiations particularly significant for global capital flows.
Equity futures have softened as investors reassess the durability of US corporate margins under sustained tariff pressure. In parallel, attention has turned to US Treasuries. A synchronised sell-off in Treasuries, equities and the Dollar remains a tail risk should fiscal concerns re-emerge as a dominant theme.
Last week’s softer Q4 GDP print adds to the narrative of moderating US momentum. This week’s consumer confidence data and Friday’s PPI release will provide further clarity on inflation persistence and rate trajectory.
Markets will also monitor remarks from Federal Reserve Governor Christopher Waller, who supported a 25bp cut in January. Should he maintain a precautionary easing bias tied to labour market softening, Dollar rallies may remain capped. A less dovish tone, however, would likely generate a short-term USD rebound given his historical signalling influence.
In aggregate, the Dollar index (DXY) appears biased toward consolidation within a 97.00–98.00 range. Structural uncertainty - trade, fiscal, geopolitical - is tempering directional conviction.
Weekly Data:
24th February
3:00pm - CB Consumer Confidence & Richmond Manufacturing Index
26th February
1:30pm - Unemployment Claims
27th February
1:30pm - Core PPI m/m & PPI m/m
Weekly Speeches:
23rd February
1:00pm - FOMC Member Waller Speaks
25th February
2:00am - President Trump Speaks
Subscribe to our weekly market updates for expert insights into major currency movements.
At VFX, our team of experienced brokers supports businesses in navigating volatile currency markets, ensuring that our clients can move, manage and protect money across borders without friction.
If your company is looking for international transaction banking solutions or ways to mitigate FX risk, please contact our team today or call +44 (0) 20 7959 6900.
