Markets Await Key Inflation Data and Spring Statement as GBP Holds Firm

GBP

The Pound struggled against its major counterparts on Friday after the Bank of England (BoE) left interest rates unchanged at 4.5%. Despite a slightly hawkish tone, the decision weighed on Sterling.

The Monetary Policy Committee (MPC) voted 8-1 to maintain rates, with only Swati Dhingra supporting a 25 basis point cut. Markets had expected two members to vote for a reduction. BoE Governor Andrew Bailey acknowledged ongoing uncertainty but reaffirmed that monetary policy remains on a “gradually declining path.”

Concerns over UK inflation persist, driven by steady wage growth. The Office for National Statistics (ONS) reported that Average Earnings (excluding bonuses) rose by 5.9% in the three months to January, reinforcing inflationary pressures in the services sector—a key focus for the BoE.

Looking ahead, the Pound faces a crucial week with:

• Wednesday: UK Consumer Price Index (CPI) (Feb)
• Friday: UK Gross Domestic Product (GDP) (Q4) and Retail Sales (Feb)

Additionally, Chancellor Rachel Reeves is set to deliver the Spring Statement on 26 March, addressing public finances, economic growth, and the cost of living crisis. Reports suggest potential spending cuts in welfare, which could impact economic growth and the Pound’s performance.

EUR

European Central Bank (ECB) President Christine Lagarde maintained a neutral stance in her EU Parliament speech, sticking to a strict data-dependent approach amid ongoing uncertainty over tariffs and fiscal policy. As a result, the ECB is unlikely to provide any clear guidance until the data dictates its next move.

Elsewhere in Europe:

• The Riksbank kept rates unchanged as expected, with little reaction from the Swedish Krona.
• The Swiss National Bank (SNB) cut rates by another 25bps to 0.25%. Notably, the SNB did not revise inflation projections lower for the first time in a long while.

Upcoming high-impact Eurozone data:

• Monday: HCOB Manufacturing, Services, and Composite PMIs (Mar)

USD

The US Dollar extended its recovery as expectations grew that the Federal Reserve (Fed) will keep interest rates higher for longer. The Dollar Index (DXY) strengthened above the key 104.00 level.

The Fed left rates unchanged last week at 4.25%-4.50%, with Chair Jerome Powell stating that economic uncertainty remains unusually high, particularly due to the impact of US President Donald Trump’s trade policies. New tariffs, set to take effect on 2 April, could drive inflation higher while weighing on economic growth.

Additionally, Fed officials, including Austan Goolsbee and John Williams, reinforced the need to hold rates steady for now. Markets currently price in a 73% probability of a rate cut in June, according to the CME FedWatch tool.

Key US data to watch:

• Monday: S&P Global Manufacturing & Services PMIs (Mar)
• Thursday: Q4 GDP Annualised
• Friday: Core PCE Price Index (Feb)

With crucial inflation data from the UK, Eurozone PMIs, and US GDP on the horizon, we could see a volatile week in the market. 
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