Sterling benefitted from unexpectedly positive GDP numbers (plus a notably weaker US dollar) to end last week on a high. In just one week, GBP/USD gained almost two per cent while the euro also made similar gains against the US dollar.
Existing US dollar weakness was magnified on Friday by some uncharacteristically poor retail data. Retail sales in the United States dropped by 0.9% month-on-month in January – the largest monthly fall since March 2023.
Deutsche Bank ended last week on a gloomy note by downgrading its forecast for UK GDP growth in the coming years. The bank now sees the British economy growing at 1% in 2025, 1.3% in 2026 and 1.5% in 2027. Those figures previously read 1.25%, 1.4% and 1.5% respectively.
The coming week looks like a busy one for currencies. The pound will be occupied with unemployment, retail sales and inflation data, which is expected to show signs of heating up again.
Elsewhere, the Federal Reserve’s FOMC minutes will be scrutinised in the usual fashion. Germany meanwhile has some key manufacturing data and the latest ZEW economic sentiment index to navigate.
The Japanese yen started the week on the front foot after GDP figures showed growth exceeded expectations in the final three months of last year. In that period, the economy expanded by 0.7%, putting the annualised figure near 3%.
Geopolitics continues to grab headlines the world over. In the Middle East, Hamas agreed to resume hostage releases after an Israeli threat to resume hostilities. Meanwhile, Europe scrambled to respond to Donald Trump and Vladimir Putin’s fateful conversation.
American vice-president JD Vance gave a highly political and provocative speech at the Munich security conference on Friday. In the presence of Europe’s political elite, Vance suggested “the threat from within Europe” – specifically freedom of expression and of elections – was greater than that posed by China or Russia.
Make sure any upcoming transactions are protected against the risks of sudden market movements. Secure a fixed exchange rate now with a forward contract or call your account manager on 020 7898 0541 to get started.
