Dollar Dips, Euro Steadies, and Pound Hits 2-Month High Amid Market Uncertainty.

• USD: USD weakens as disappointing retail sales and tariff delays fuel Fed rate cut speculation, with expectations shifting to late 2025.
• EUR: EUR edges higher near 1.05 amid USD weakness and hopes for Russia-Ukraine peace talks.
• GBP: GBP hits a two-month high as solid GDP growth boosts confidence, with inflation data set to shape BoE rate outlook.
• Market Focus: UK inflation figures as well as PMI figures will be key this week.

USD: The USD is currently under pressure due to weaker than expected economic indicators. Recent U.S. retail sales data fell short of forecasts, leading to increased speculation about potential Federal Reserve rate cuts later this year. Additionally, the delay in implementing proposed tariffs by President Donald Trump has introduced uncertainty, contributing to the dollar’s softness. Federal Reserve Chair Jerome Powell reaffirmed last week a cautious stance on rate cuts, stating that the central bank is in no rush to lower rates amid sticky inflation concerns. Markets had previously anticipated a rate cut in March, but following recent data, expectations have now shifted toward the second half of 2025.

EUR: The euro has shown resilience, inching closer to the 1.05 mark, currently trading at $1.0488. This strength is partly attributed to the broader weakness of the USD and ongoing geopolitical developments, including talks aimed at resolving the Russia-Ukraine conflict. Euro could find support if a ceasefire in Ukraine is reached and gas supplies resume. Reports indicate that US President Donald Trump and Russian President Vladimir Putin have agreed to begin negotiations to end the conflict, with Trump administration officials set to meet Russian counterparts in Saudi Arabia on Tuesday for talks on a potential peace deal. Markets are also closely monitoring upcoming economic data from the Eurozone, which could influence the European Central Bank’s policy stance going forward.

GBP: Sterling is trading near a two-month high. This performance is bolstered by stronger than expected UK GDP growth of 0.1% in the fourth quarter of the previous year, which has improved sentiment toward the British economy. Investors are now focusing on upcoming UK employment and inflation data, which are expected to provide further insights into the Bank of England’s future monetary policy decisions. This weeks inflation figures on Wednesday will be a key data point for the Bank of England, with figures expected to show an increase on inflation therefore potentially causing the Bank of England slow down on rate cuts as we move through 2025.

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