Sterling Steady as Dollar Falters: Markets Eye Key PMI Data and Central Bank Speeches

GBP

The British pound has maintained its strength, recently reaching a seven-month high against the US dollar. This resilience is largely due to a weakening dollar, driven by renewed concerns over the independence of the Federal Reserve following President Donald Trump’s intensified criticism of Chair Jerome Powell.

In the UK, Chancellor Rachel Reeves is set to advocate for global free trade at the upcoming IMF meetings in Washington, while Prime Minister Keir Starmer continues efforts to secure a trade deal with the United States. These developments have bolstered confidence in the pound.

However, gains have been tempered as markets await a speech from Bank of England Deputy Governor Sarah Breeden. Any indication of a potential shift in monetary policy due to global economic headwinds could impact sterling’s performance.

Additionally, forthcoming UK services and manufacturing PMI data are expected to show a decline. If confirmed, this could place further pressure on the pound and dampen investor sentiment.

EUR

The euro has experienced volatility, with the GBP/EUR exchange rate currently trading around 1.1620. Investor sentiment remains cautious, influenced by recent warnings from European Central Bank (ECB) President Christine Lagarde regarding the economic impact of US tariffs.

The ECB’s recent 25 basis-point rate cut, aimed at supporting the eurozone economy, reflects concerns over slowing growth and subdued inflation. Lagarde emphasised that escalating trade tensions could undermine economic stability, and urged a resilient, data-driven policy approach.

Looking ahead, the release of PMI figures from both the UK and the eurozone will be closely monitored, as they are expected to influence the GBP/EUR exchange rate.

USD

The US dollar has fallen to a three-year low as markets respond to President Trump’s ongoing criticism of Federal Reserve Chair Jerome Powell and concerns over the central bank’s independence. Trump’s public remarks, including calling Powell a “major loser”, have heightened fears of political interference in monetary policy.

Additionally, rising trade tensions with China have contributed to the dollar’s weakness. Beijing’s retaliatory tariffs and increasingly assertive rhetoric have unsettled investors, further undermining confidence in the greenback.

US equity markets have also felt the impact, with major indices declining amid the heightened uncertainty.

Looking Ahead

This week, markets will be focused on:

• Speeches from central bank officials, particularly Bank of England Deputy Governor Sarah Breeden
  
• UK and eurozone PMI data releases, which will offer fresh insights into business activity
  
• Developments in US–China trade relations and their broader impact on market sentiment

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