Last week saw GBP weaken on economic stagnation, USD rise on safe-haven demand, and EUR hold firm on European Central Bank policy. This week, markets will focus on U.S. jobs data, inflation figures, and global risk factors to gauge central bank policy directions.
Market Recap: Key Movers from Last Week
The British pound struggled as UK GDP stagnated in February, showing 0% growth after a modest 0.3% expansion in January. This sign of economic weakness, combined with lower-than-expected inflation, dampened expectations for further Bank of England rate hikes, leading to GBP depreciation.
The U.S. dollar strengthened as investors sought safety amid geopolitical tensions, including a U.S. military offensive. Market sentiment favored the dollar due to uncertainty over global growth and economic stability.
The euro held firm as ECB President Christine Lagarde reiterated a data-driven approach to monetary policy. The central bank’s commitment to managing inflation helped support EUR, despite broader risk pressures.
Key Events This Week: Major Market Drivers
U.S. labuor market data will be the key focus, with JOLTS job openings on Tuesday, ADP employment data on Wednesday, jobless claims on Thursday, and the highly anticipated Non-Farm Payrolls report on Friday. Strong job growth could reinforce expectations for further Federal Reserve tightening, while weaker data may fuel recession concerns.
In addition to employment reports, the U.S. will release ISM Manufacturing and Services PMI data, offering insights into overall business sentiment and economic momentum.
For the UK, housing market trends and PMI data will be closely watched. Signs of resilience could support the pound, while further signs of stagnation may add to its weakness.
The Eurozone’s inflation report will be pivotal in determining the ECB’s next policy moves. Higher inflation could reinforce a hawkish stance, supporting the euro, while a softer reading may raise doubts about further rate hikes.
Global risk sentiment will also play a crucial role. Any escalation in geopolitical tensions or shifts in central bank expectations could drive investors toward safe-haven assets like the U.S. dollar.
Currency Outlook: How Markets May React
The British pound’s direction will largely depend on domestic economic data. Strong housing or PMI figures could offer support, while weak numbers may reinforce concerns about stagnation.
The U.S. dollar’s movement hinges on jobs data. Strong labor market figures and upbeat ISM reports could strengthen the dollar by keeping Fed tightening on the table. Weaker data, however, might lead to a softer USD as recession fears grow.
The euro will be driven by inflation data. Higher inflation could prompt a more hawkish ECB stance, providing support for EUR, whereas weaker inflation may raise concerns over the bank’s ability to maintain its current policy course.
Global risk factors remain a wildcard. Rising geopolitical tensions or disappointing global data could push investors toward the dollar, while signs of economic resilience in the UK and Eurozone could stabilize GBP and EUR.
Bottom Line: Markets Eye U.S. Jobs Data & Inflation Trends
With U.S. labor market data taking center stage, currency movements will be heavily influenced by whether strong job growth supports further Fed tightening or if signs of a slowdown shift expectations toward rate cuts. Meanwhile, UK and Eurozone economic reports will shape the near-term outlook for GBP and EUR.
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