Currency markets moved decisively last week as investors recalibrated expectations around growth, inflation and policy direction in the UK, US and euro area. Sterling came under sustained pressure, recording its largest weekly decline against the euro since early December before stabilising into the close. Against the dollar, the pound held broadly in the mid 1.30s, but relative weakness against the single currency signals more cautious positioning toward UK assets.
Fourth quarter GDP expanded by 0.1 per cent, below consensus expectations of 0.2%. On an annual basis, the pace of expansion also moderated. While the economy remains in positive territory, the margin of growth is narrow, leaving limited buffer against external shocks or domestic political uncertainty.
In the United States, inflation data has shifted expectations in the opposite direction. January’s headline reading slowed to 2.4 per cent year on year, below forecasts, while monthly and core measures also eased. The data strengthens the case for interest rate reductions later in the year. As policy expectations adjust, the dollar has lost some of its recent momentum.
The euro has been comparatively resilient. EUR/USD opened the week in the upper 1.10s, supported by a solid euro area goods trade surplus for December. External balances remain a relative strength for the bloc and provide a degree of structural support for the currency.
Finseta Plc (LON:FIN), formerly Cornerstone FS PLC, is a United Kingdom-based foreignexchange and payments company offering multi-currency accounts and payment solutions to businesses and individuals through its global payments network.
