The pound has quietly put together a strong week. Backed by a run of better-than-expected economic releases, sterling has picked up around half a cent against the dollar and held firm against the euro. It’s a welcome shift after a bumpy start to the year.
The numbers have been genuinely encouraging. UK retail sales surged 1.8% in January – far above forecasts – while the latest business surveys showed the fastest rate of private sector growth since April 2024. Manufacturing activity hit an 18-month high. Even the public finances surprised, with the Treasury posting its biggest January surplus since records began in 1993. Against the backdrop of sluggish gross domestic product (GDP) growth at the tail end of 2025, this week’s data suggests the economy may be finding its feet.
The question now is what comes next. The Bank of England’s next interest rate decision lands on 19 March, and Governor Bailey told MPs this week that a cut remains an open question. Services inflation at 4.4% is running above the Bank’s own forecasts, which gives the rate-setters something to think about. Chief economist Huw Pill – who has been more cautious about the pace of cuts – speaks this afternoon at 1pm and could add a hawkish note.
On the other side of the Atlantic, the dollar’s slide has continued. Weak growth figures, sticky inflation and ongoing confusion over the new tariff framework have all weighed on the currency. US durable goods orders and weekly jobless claims are due this afternoon, offering a fresh snapshot of how the American economy is holding up.
Tomorrow brings a busy morning for eurozone watchers, with preliminary February inflation figures from Germany, France and Spain. These will set the tone ahead of the European Central Bank’s (ECB) next meeting, also on 19 March. It’s shaping up to be a pivotal few weeks for all three major currencies.
