Sterling advanced last week as markets responded to stronger-than-expected UK economic data, reducing the likelihood of near-term interest rate cuts. The pound gained over 1.5% against the US dollar and moved higher against the euro, reflecting a shift in investor positioning rather than broader weakness in the dollar or euro.
January purchasing managers’ indices for the UK came in above expectations, remaining firmly in expansion territory. Retail sales for December also surprised to the upside, reversing last month’s decline and pointing to stronger consumer spending. These figures prompted a repricing in interest rate futures, with investors scaling back bets on a February rate cut by the Bank of England.
The US dollar weakened across the board, with the US Dollar Index hitting its lowest level in four months. Sterling and the euro both gained, as the greenback faced pressure from trade uncertainty and shifting central bank reserve allocations. Recent moves by global central banks to diversify away from US Treasuries and into gold suggest reduced structural demand for dollars, a factor likely to influence currency strategy and fixed income exposure.
In the eurozone, data remains mixed. The composite PMI showed moderate growth, led by manufacturing stabilisation, but services softened and labour market indicators weakened, particularly in Germany and France. Inflation in services is still elevated, complicating the European Central Bank’s path forward. While another rate cut remains on the table later in the year, markets see limited room for early easing.
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.
