Sterling made tentative progress against the euro last week, briefly reaching its highest level since early March. While it would later give up some of these gains, GBP/EUR nonetheless ended the week around 0.5% above where it began. After the Bank of England decided to hold interest rates at 4.5%, attention now shifts to Labour’s spring statement on Wednesday (26 March).
The US dollar finally emerged from its prolonged slumber to record minor weekly gains over the pound and the euro. Falling confidence in the American economy makes its position prone to volatility, particularly ahead of the next batch of trade tariffs, expected in early April.
UK chancellor Rachel Reeves will be in the thick of this week’s action in the world of currency. With fiscal headroom (i.e. the wiggle room left in the budget) limited, Reeves is thought to be lining up a package of departmental and social care cuts that could prompt a backbench revolt. Currency markets will also be eyeing the statement with interest.
Earlier that day, February’s UK inflation report arrives. Given the Bank of England has started to make some nervous noises around resurgent inflation, sterling is bracing for at least a few months of stubborn price rises. Economists expect the headline figure to be almost unchanged from January’s figure, around 3%.
London’s Heathrow airport has reopened after a substation fire grounded flights and scuppered holiday plans for thousands. The government, safety agencies and Heathrow itself are facing questions over how this could happen to Europe’s biggest airport.
This week begins with some important industry data from both the UK and Germany. Germany’s purchasing manager’s index (PMI) is expected to have expanded, with minor falls for British manufacturing and services.
Germany’s Ifo business climate survey on Tuesday will be an interesting one to watch given the new mood of optimism in Europe’s largest economy. The US also has a few high-impact reads, notably GDP figures and the latest Core PCE report, the Federal Reserve’s preferred measure of inflation.
Also likely to affect sterling are UK retail sales on Friday. Euro watchers will get a glimpse of French inflation data that day, too.
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