Market Steadies as Investors Eye Key Central Bank Rate Decisions
GBP
GBP/USD is currently trading at 1.2943 (interbank), while GBP/EUR stands at 1.1884 (interbank).
Sterling remains near its highest levels in four months against the U.S. Dollar, benefiting from last week’s weaker-than-expected U.S. inflation data.
However, concerns persist about the UK’s economic growth following January’s GDP contraction of -0.1%, which fell short of the expected 0.1% increase and marked a sharp drop from December’s 0.4% expansion.
This will likely influence some members of the Bank of England’s Monetary Policy Committee (MPC) ahead of Thursday’s interest rate decision.
While most policymakers have signalled a cautious and measured approach to rate cuts, Catherine Mann has expressed a more aggressive stance, arguing that gradual reductions are no longer necessary due to market volatility caused by uncertainty around U.S. and EU policies. The consensus remains that rates will be held at 4.5% this week, but markets now expect at least two cuts by the end of the year, with growing speculation around adjustments in May and August.
Furthermore, the latest employment data will be published tomorrow.
No significant events are scheduled for today.
EUR
EUR/USD is now trading at 1.0883 (interbank), retreating slightly from last week’s highs near the 1.0900 level.
The euro remains supported by renewed optimism surrounding fiscal expansion in Germany after political parties agreed on a major infrastructure and defence spending package.
German leaders, led by the Greens’ Franziska Brantner, reached an agreement to establish a €500 billion investment fund while adjusting borrowing regulations—a move that is expected to be passed in parliament tomorrow.
Meanwhile, markets are monitoring geopolitical developments, as U.S. President Donald Trump and Russian President Vladimir Putin are expected to hold discussions tomorrow, with speculation growing over a potential ceasefire in Ukraine following Zelensky’s agreement to a 30-day truce.
The latest inflation figures are due on Wednesday expected to show a slight decline in the annual CPI reading but an increase monthly, potentially signalling early signs of demand recovery in the Eurozone.
Additionally, ECB President Christine Lagarde will deliver speeches today and Thursday, while the ECB Economic Bulletin will be released ahead of the EU Leaders’ Summit. These events will provide further insights into the central bank’s stance on future rate cuts, especially following last week’s 25-basis-point reduction.
Today’s Events (GMT):
14:00 - ECB President Lagarde Speaks
USD
The Dollar Index, which tracks the U.S. dollar against a basket of major currencies, remains steady at 103.72, hovering just above the five-month low of 103.21 reached last week.
The dollar has weakened significantly this year, with losses exceeding 6% from its January highs, as optimism around Trump’s economic policies has faded amid mounting concerns over the impact of his trade tariffs.
Recent U.S. economic data has reinforced expectations that the Fed may need to cut interest rates sooner than previously thought, with Friday’s consumer sentiment survey showing confidence at a two-and-a-half-year low and inflation expectations climbing due to trade-related cost pressures. Additionally, the latest U.S. consumer price index (CPI) for February came in softer than expected, further strengthening the case for rate cuts.
The primary focus this week is on Wednesday’s two-day Federal Open Market Committee (FOMC) meeting, where no change in rates is expected, but markets will closely watch Chair Jerome Powell’s press conference for clues on future policy direction.
Before that, today’s U.S. retail sales data will provide insight into consumer spending trends, a key driver of the U.S. economy.
Today’s Events (GMT):
12:30 - Retail Sales (Feb) – Forecast: 0.6%
12:30 - Core Retail Sales (Feb) – Forecast: 0.3%
CAD
USD/CAD is currently trading lower at 1.4364 (interbank) in this morning’s session.
The Canadian dollar remains under pressure following last week’s BoC decision to cut its benchmark interest rate to 2.75%, citing concerns over slowing economic growth and inflationary risks stemming from ongoing U.S. trade disputes.
Meanwhile, newly elected Canadian Prime Minister Mark Carney is in Paris for his first diplomatic visit, where he is seeking to strengthen economic ties with European partners amid rising tensions with the U.S. Canada has been hit hard by escalating tariffs, with Trump imposing additional duties on Canadian imports while insisting that his administration will continue to monitor trade imbalances before reconsidering exemptions.
Key economic data this week includes Tuesday’s inflation report, Thursday’s producer price index (PPI) release, and Friday’s retail sales figures, though their significance may be overshadowed by ongoing tariff uncertainty and the recent government tax holiday that lasted from mid-December to mid-February.
Meanwhile, oil prices edged higher in early trading after the U.S. pledged continued military action against Yemen’s Houthi rebels. Brent crude is currently at $71.14 per barrel, while West Texas Intermediate (WTI) is at $67.74 per barrel.
Today’s Events (GMT):
12:15 - Housing Starts (Feb) – Forecast: 246.0K
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