Sterling starts the week with investors focused on whether it can move beyond recent resistance levels. The pound held broadly steady last week, with GBP/EUR trading around 1.15 and GBP/USD staying near 1.34. Both pairs are close to important levels, but neither has yet delivered a clear breakout.
Sterling has support, but the market still needs a stronger reason to push it higher. GBP/EUR has struggled to move above 1.16, while GBP/USD has tested the route towards 1.35 without holding a decisive move. These levels matter because they show where sentiment is being tested. A break higher would suggest improving confidence in sterling, while another failure could leave the pound exposed to short-term pressure.
The main UK focus this week is Bank of England Governor Andrew Bailey, who is due to speak three times. His comments could influence expectations for interest rates and inflation. If he sounds cautious about inflation, investors may see that as supportive for sterling because it could reduce expectations for faster rate cuts. If his tone is softer, sterling may find it harder to move through resistance.
Global risk is also important. Tensions in the Middle East remain a major factor for currency markets. The U.S. has confirmed strikes on Iranian military sites, while Tehran has responded against an American base. Any further escalation could push investors towards the U.S. dollar, which often benefits when markets become more defensive. That would make it harder for GBP/USD to break higher, even if the UK backdrop remains stable.
The U.S. data calendar could also shape direction. Manufacturing figures are due early in the week, followed by labour market releases and Friday’s nonfarm payrolls report. Strong U.S. data would likely support the dollar and limit gains for sterling and the euro. Weaker data could have the opposite effect, reducing dollar strength and giving other currencies room to recover.
The euro remains steady, with EUR/USD around 1.16. The single currency may benefit if Middle East tensions ease and oil prices remain under control. However, the broader eurozone picture looks less supportive than it did earlier in the year. Investors will be watching eurozone retail sales and comments from Christine Lagarde for signs of whether growth and policy expectations can improve.
This week is therefore likely to be driven by three factors: central bank signals, U.S. economic data and geopolitical risk. Sterling has a chance to move higher, but it needs clearer support. Until then, investors should treat the current levels as a test of confidence rather than confirmation of a stronger trend.
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.
