It’s politics and policy shaping major currency pairs at the moment, rather than the data coming our way. Sterling is feeling the pressure amid UK political uncertainty and a more dovish Bank of England, while the euro held steady following last week’s ECB meeting. Read on to find out more about the key stories impacting dollar, sterling and the euro.
Current rates
| Currency pair | Rate |
|---|---|
| gbp usd | 1.3643 |
| eur usd | 1.1874 |
| gbp eur | 1.1490 |
Rates correct as of 12:17pm on Monday 9 February but may now have changed.
The Big 3
A deeper look at the performance of major currency pairs this week. Become a subscriber to receive the full reports.
Political risk meets policy divergence as pressure mounts on GBP/USD
GBP/USD pulled back sharply as a combination of UK political uncertainty and renewed dollar strength weighed on sterling. Concerns around Starmer’s leadership add a political risk premium this week, while a surprisingly close BoE vote reinforced expectations that rate cuts are edging closer. At the same time, the dollar found firmer footing as short positioning was squeezed and markets priced in Fed resilience following Warsh’s nomination. With UK GDP and delayed US labour and inflation data ahead, near-term direction hinges on whether policy divergence between the Fed and BoE continues to widen.
Dollar dynamics take centre stage following ECB steady hand
EUR/USD consolidated as the dollar stabilised following its recent sell-off. The ECB delivered a fully expected hold, striking a relaxed tone on growth and dismissing concerns that recent euro strength warranted intervention. With euro fundamentals largely unchanged, near-term direction is set to be driven almost entirely by the dollar. Heavy US data risk – including delayed payrolls, inflation and retail sales – comes as stretched short dollar positioning raises the risk of further squeezes.
BoE dovish tilt and UK politics weigh on GBP/EUR
With renewed pressure on sterling and a dovish-leaning Bank of England, GBP/EUR lost prior gains. In contrast to the political risk premium faced by sterling, the euro remains relatively insulated, with the ECB comfortable that current policy and exchange rate levels are appropriate. With eurozone data light, GBP/EUR looks set to remain choppy, driven primarily by UK political developments and shifting rate expectations rather than euro-specific fundamentals.
Looking forward
Key dates for your calendar.
- Monday: AUS Westpac consumer confidence
- Tuesday: US retail sales
- Wednesday: Delayed US jobs report for January. China inflation data.
- Thursday: US home sales. India CPI. UK GDP.
- Friday: US CPI. China home prices.
Here’s what we’re talking to our clients about
We’re always here to support. Here are some of the conversations we’re having:
- ECB rate decision last week
- Ongoing Trump and Fed relationship
- Evolving UK political situation
The contents of this article do not constitute financial advice and are provided for general information purposes only. While the content is based on information believed to be accurate at the time of publication, no guarantee is provided.