31 March 2025

GBP

It’s a quiet week ahead for UK data releases, meaning GBP movement may remain relatively muted. Markets continue to digest the impact of Chancellor Rachel Reeves’ Spring Statement, with attention now shifting to how those changes will filter through the economy. 

Reeves' announcements included significant cuts to the welfare budget, reiterated her promise to cut the administrative budgets of government departments, and committed to an extra £2.2bn towards defence spending over the next year. 

Sterling is also reacting to last week’s inflation data after CPI came in lower than the 3.0% expected at 2.8%. With market expectations for year-end inflation now revised down from 3.7% to 3.2%, continued lower-than-expected inflation could act as a drag on sterling strength over the medium term if it impacts the forecasts for the Bank of England’s interest rate easing cycle. 

Despite the lack of domestic drivers, GBP remains relatively strong. GBP/EUR is trading just two cents off multi-year highs last seen in March and December 2024, while GBP/USD is hovering near multi-month highs, benefiting from ongoing uncertainty over the outlook for the US economy. 

EUR

The eurozone started the week with a positive surprise from Germany, when retail sales surged to 4.9%, beating the previous 3.3% reading. The focus now turns to inflation data, with Germany’s CPI due this afternoon – markets will be watching closely for any deviation from the prior 2.3%, which could spark euro volatility. 

As of this morning, French far-right leader Marine Le Pen has been found guilty of embezzling EU funds. Consequently, she has been given a five-year ban on running for office, with immediate effect, taking her out of the 2027 Presidential election race. This development is expected to cause some market volatility for the euro in the coming days.

Tuesday brings the wider eurozone CPI release, which is forecast to edge slightly lower from 2.3% to 2.2%. Any surprises here could influence speculation around the European Central Bank’s next policy move. 

USD

Political developments are likely to dominate USD sentiment this week. Tensions between the US and Russia escalated over the weekend after President Trump voiced his frustration at President Putin for rejecting a proposed ceasefire deal. Talks around Ukraine’s rare earth minerals in exchange for US military support remain in deadlock, adding further uncertainty. 

The geopolitical unease may benefit the traditionally safe-haven US dollar. However, this could be counteracted by fresh market concerns over US trade policy, with potential tariffs on Russian oil reportedly under consideration following the failed ceasefire proposal. 

On the data front, the US has a busy schedule. The ISM Manufacturing PMI is expected to fall from last month’s reading of 50.3, to 49.6 on Tuesday. Wednesday’s ADP employment change is forecast to rise from 77k to 120k, while Thursday sees the services PMI expected to tick slightly lower from 53.5 to 53. Friday rounds out the week with nonfarm payrolls, where job creation is projected to slow from 151k to 139k, when it’s released along with the latest earnings data. 

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.