The febrile atmosphere at Westminster calmed, somewhat, last week, leaving the pound treading water against the US dollar and euro.
It looks like a currency waiting for a reason to pick a direction, and that may come soon. This is the week when economics comes back to the fore. From tomorrow, every day has something meaty for the markets to chew on.
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The Office for National Statistics (ONS) has labour-market updates tomorrow, inflation on Wednesday, then retail sales and the public finances on Friday. After this month’s close decision from the Bank of England, a cut next month is widely expected, with last Thursday’s economic growth data for the UK being anaemic at best, at just 0.1% for the last quarter of 2025. However, economic indicators that differ from the expected will complicate that picture and pose risks for sterling.
In Washington, the markets are closed today (for Presidents’ Day) but the row between the White House and the Federal Reserve is still hanging over. Central bank independence is one of those boring-sounding things that matters a lot when it’s tested. It’s been a nagging worry for the dollar, even when the day-to-day data looks fine, with non-farm payrolls much better than expected and inflation down to 2.4%
Back home, the sense of a beleaguered government turning leftwards has kept sterling traders cautious. The week certainly ended better for the prime minister, but you know what they say about weeks and politics – the story may return at any time.
