Pound Sterling (GBP)

The British Pound is likely to remain volatile, influenced by weaker-than-expected UK GDP growth and mounting concerns over stagnating economic conditions. Following last week’s selloff, both GBP/EUR and GBP/USD have declined. Key data releases this week, including PMI figures, the labour market report, CPI data, and the Bank of England’s interest rate decision, will play a pivotal role for the Pound. Weak outcomes could prompt further rate cuts, adding pressure on Sterling, while robust data might offer some stability.

Euro (EUR)

The Euro faces headwinds today, as French, German, and Eurozone December flash PMIs are likely to remain in contraction territory. Meanwhile, political uncertainty in Germany, with Chancellor Scholz’s government facing a no-confidence vote, could pave the way for fiscal stimulus, potentially boosting the Euro by 2025. In the near term, comments from ECB officials—particularly hawks—may impact the Euro if they push back against expectations of rate cuts.

U.S. Dollar (USD)

The U.S. Dollar gained strength last week, buoyed by encouraging inflation and PPI data, with inflation hitting a four-month high. Despite a quiet close to the week with no major data releases on Friday, the greenback remained steady. Looking ahead, the Federal Reserve’s upcoming interest rate decision will be a critical factor, as any surprises in policy could trigger notable volatility for the Dollar.