Dollar Drops on Tariff Delay; Markets Eye Russia-Ukraine Peace Deal
GBP
GBP/USD is currently trading at 1.2590 (interbank), while GBP/EUR stands at 1.2020 (interbank).
Sterling faced early challenges last week as concerns over the UK’s economic outlook weighed on sentiment, and a lack of major UK data releases made it difficult for the Pound to gain traction.
However, the currency found some support towards the end of the week after UK GDP figures for Q4 showed unexpected growth of 0.1%, outperforming the forecast of -0.1% and reducing expectations of an imminent interest rate cut from the Bank of England.
This week, key UK economic data takes centre stage, with inflation figures due tomorrow and employment data on Wednesday, both of which could strongly influence future BoE monetary policy.
Additionally, BoE Governor Andrew Bailey is scheduled to speak on Tuesday, and markets will be watching closely for any hints on the central bank’s outlook.
No significant events are scheduled for today.
EUR
EUR/USD remains on an upward trajectory, currently trading at 1.0484, its highest level since 18 December, after briefly reaching this level in late January.
The euro’s recovery has been driven by two main factors – the postponement of US reciprocal tariffs and ongoing peace talks concerning the Ukraine conflict. However, the sustainability of the Euro’s rally remains uncertain given the unpredictability surrounding Trump’s trade policies and the complexity of ceasefire negotiations.
Further downside pressure persists as multiple ECB policymakers maintain a dovish stance, with expectations of at least three more interest rate cuts this year following last month’s 25 basis point reduction to 2.75%.
Today, the Eurozone Trade Balance report is due, with markets anticipating a surplus of €14.4B, offering insight into external demand and potential impacts on GDP growth.
Tomorrow, the ZEW Economic Sentiment Index is forecast to rise to 24.3 from 18.0, reflecting improved investor confidence amid easing inflation and a stable labour market. Meanwhile, Wednesday’s ECB Non-Monetary Policy Meeting and Friday’s flash PMI data for February will be closely watched.
Today’s events (GMT):
14:00 - ECB President Lagarde Speaks
USD
The Dollar Index, which tracks the U.S. dollar against six major currencies, stands at 106.82, up 0.1%, after falling 1.2% last week.
US retail sales data showed the largest monthly decline in nearly two years, with sales falling 0.9% in January after an upwardly revised 0.7% increase in December, adding to pressure on the dollar.
Meanwhile, reports indicate that US President Donald Trump and Russian President Vladimir Putin have agreed to initiate negotiations aimed at ending the Ukraine conflict, with US and Russian officials set to meet in Saudi Arabia on Tuesday to discuss a potential peace deal.
Last week, Trump also postponed proposed reciprocal tariffs, easing market concerns over inflation and reinforcing the view that his trade threats may be more of a negotiation tactic than an immediate policy shift.
Data from the US is relatively light this week, with several Federal Reserve officials due to speak, followed by jobless claims and PMI data on Thursday and Friday, respectively.
No significant events are scheduled for today.
CAD
USD/CAD has slipped to 1.4191 (interbank) after touching a two-month high last week, reaching its strongest intraday level since 12 December at 1.4152.
The Canadian dollar strengthened towards the end of last week as investor scepticism grew over the severity of Trump’s proposed trade tariffs, leading to improved sentiment for the Loonie.
However, despite its outperformance against the US dollar, the Canadian dollar remains under pressure as the Bank of Canada is still expected to lower interest rates further to counter the risk of inflation falling below the 2% target.
This week, market focus will be on Canada’s Consumer Price Index (CPI) inflation data for January, due tomorrow. Economists anticipate little change in inflation, given that December’s annual rate eased to 1.8%, largely due to the federal government’s temporary sales tax holiday on a range of consumer goods.
Additional data releases include the Raw Materials Price Index on Tuesday, followed by retail sales figures on Friday and a speech from BoC Governor Tiff Macklem.
Meanwhile, oil prices have edged lower, with Brent crude currently at $74.94 per barrel, while West Texas Intermediate (WTI) sits at $70.92 per barrel.
No significant events are scheduled for today.
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