13 February 2025
Weekly Market Headlines:
The past 24 hours have been turbulent in the currency markets. US inflation came in higher than expected, initially strengthening the US dollar as traders adjusted their expectations, now pricing in just one rate cut for 2025—currently projected for December. Some analysts even suggest the Federal Reserve’s next move could be a hike rather than a cut.
Shortly after, a conversation between President Trump and Russian President Putin signalled potential progress toward peace in Ukraine. This reversed the earlier Dollar strength, as markets moved away from safe-haven assets amid hopes of reduced geopolitical risk.
This morning, UK GDP figures surprised to the upside, providing further momentum to UK sterling, which continues to rise against a basket of currencies.
Key developments:
- GBP/USD is testing two-month highs following peace talks and stronger UK economic data. The pair remains highly volatile, having already moved over 4% in 2025.
- Traders’ Focus: Additional US inflation data today and retail sales figures tomorrow will be key for further direction. Another upside inflation surprise could reinforce US Dollar strength and prompt markets to price out any further Fed rate cuts.
- February’s Banking Forecasts indicate continued volatility for all Sterling-based pairs as markets assess the UK’s debt position, economic performance, and future interest rate path.
- Sterling Outlook: Analysts anticipate further pressure on UK sterling throughout 2025, with forecasts suggesting a downgrade in its strength over the year.
Final thoughts:
Another day, yet the narrative remains the same-markets are highly volatile, and this trend is likely to continue. If your business is not sufficiently hedged, or remains unhedged altogether, you could be exposed to significant swings in costs (if you have overseas expenses) or revenue (if you generate income from overseas markets).
At Lumon, we provide systematic risk management strategies to help protect against adverse exchange rate movements.
To discuss how we can support your business, please contact your dedicated currency specialist on +44 (0) 203 384 7280 to discuss solutions tailored to your needs.
