Sterling Range-Bound as Central Banks, Trade Tensions and Safe-Haven Flows Drive Markets

GBP

The Bank of England (BoE) is expected to maintain a cautious easing bias following its recent rate cut to 3.75%, reinforcing a modestly dovish backdrop for Sterling.

Key UK data releases this week, including PPI and retail inflation, could provide fresh directional catalysts for GBP.

GBP/USD remains range bound in the upper 1.33–1.34 region, with Sterling caught between limited domestic drivers and broader global risk sentiment.

USD

The U.S. Dollar has remained resilient despite softer inflation signals and mixed economic data, with the DXY holding near the 99.3 level into the weekend.

Geopolitical risks and central bank uncertainty continue to dominate. Markets are pricing potential Fed rate cuts later in 2026, while near term safe haven demand is lending support to the USD.

Sentiment has been weighed down by reports of a DOJ criminal investigation targeting Fed Chair Jerome Powell, raising concerns over political pressure and the independence of the Federal Reserve.

Separately, former President Trump has threatened NATO allies with tariffs unless they support his proposal regarding Greenland. Proposed measures include a 10% tariff from February, rising to 25% by June if no agreement is reached, marking a significant escalation in geopolitical and trade tensions.

EUR

EUR/USD is trading around the 1.16 handle, pressured by renewed U.S.–Europe trade tensions and increasingly dovish expectations for the ECB.

Upcoming Eurozone inflation data and German economic indicators early this week will be key in shaping EUR sentiment and ECB policy expectations.

Central Banks

Federal Reserve (USD)

U.S. inflation indicators continue to show signs of moderation, reinforcing market expectations for rate cuts later in 2026 rather than near-term easing.

Chair Powell remains firmly data dependent, balancing resilient labor market conditions against inflation risks amid unprecedented political scrutiny.

Bank of England (GBP)

The BoE is viewed as unlikely to hike further, with policy expected to remain on hold following recent cuts. UK inflation dynamics, particularly services inflation will be closely watched this week for signals on future policy direction.

European Central Bank (EUR)

The ECB is expected to remain patient. Upcoming Eurozone HICP and core inflation readings early in the week will be pivotal for EUR direction and policy expectations.

Key Data & Events This Week

• Mon–Tue: Eurozone HICP, German PPI & ZEW; UK PPI & retail inflation
• Tue–Wed: U.S. ADP employment, jobless claims, and PCE inflation
• Risk catalysts: Trade and tariff developments, geopolitical headlines, and central bank commentary

Commodities

Gold & Metals

Gold surged to fresh record highs above $4,600/oz over the past week, driven by strong safe-haven demand amid geopolitical tensions, U.S.–EU trade risks, and uncertainty surrounding the Powell investigation.

Silver and other precious metals also advanced to multi year highs.

Oil

Brent and WTI crude prices have hovered near multi week highs (~$64/$60+), supported by geopolitical risk premiums and concerns over Iranian exports, although tariff related risks continue to cloud the outlook.

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