03 March 2025

GBP

The pound remained well-supported against its peers last week, hitting ten-week highs against both the US dollar and the euro on Thursday.

Sterling’s strength can mainly be attributed to better-than-expected UK economic data for the month of February. This upturn has eased pressure on the pound. Additionally, a more risk-on mood in the markets has led to fewer safe-haven flows into the USD as investors look to other prospects. Divergence from interest rate forecasts between the UK and the EU have also played a role in this shift.

EUR

The speculation of the US tariffs on the EU made impacts on the euro last week Despite this, there has been an overall uptick against the Dollar in February, climbing from lows of 1.0203 to a high of 1.0528 before retracting back to below 1.04.

This is partially because data feeds in the Eurozone have been slightly stronger, but USD weakness over the past month has been the key driver in the euro’s recovery. However, the proposal of US tariffs have the potential to impact Central Europe, with one analyst suggesting a 25% US tariff could restrict GDP growth in the CEE by up to 0.5%.

The focus for the week ahead will be on the European Central Bank meeting on Thursday, where another 25 basis points of cuts are widely anticipated, bringing the deposit and refinancing rates to 2.5% and 2.65% respectively. The press conference and meeting statements from ECB President Christine Lagarde will be closely watched for any hints on future policy direction.

USD

The dollar has struggled to find demand at the beginning of the week as markets continue to monitor and assess the latest geopolitical developments. US economic data has also been weaker of late, with quarterly GDP flatlining and unemployment claims rising last week.

A meeting between US President Donald Trump, Vice President JD Vance and Ukrainian President Volodymyr Zelensky made headlines on Friday and has cast doubt over a minerals deal between the US and Ukraine, however a senior US official suggested that a deal is still possible. Drawing up an agreement between the two countries could be a step in the right direction for a ceasefire in the Russia-Ukraine conflict and would be expected to have market impact.

The Ukrainian President has since stressed his gratitude for US help and praised European unity. After leaving the US, President Zelensky flew to London for talks with European leaders. On Sunday, Keir Starmer announced a four-step plan to guarantee peace in Ukraine, stating that Europe must do the “heavy lifting.”

Despite the widely reported tense talks with President Trump and Vice President Vance on Friday, Zelensky has on Monday said he is still ready to agree the minerals deal that would give the US access to some of Ukraine’s resources, but also stressed the need for security guarantees in any peace deal.

Aside from watching any developments with the US-Ukraine minerals deal, the markets will continue to focus on developments regarding US tariffs, with tomorrow’s deadline to impose tariffs on China, Mexico, and Canada, which Trump stated this past Thursday “will, indeed, go into effect, as scheduled”.

Views expressed in this commentary are those of the author, and may differ from your appointed Moneycorp representative. This commentary does not constitute financial advice. All rates are sourced from Bloomberg and forecasts are taken from Forex Factory.