UK: Weekly FX Market Update 3 February 2025

GBP

• The main attraction this week could be the Bank of England (BoE), who are expected to cut rates by 0.25% to 4.5% this Thursday, according to Bloomberg analysts.

• After the Federal Reserve and European Central Bank rate decisions last week, the market stayed relatively calm. Will the BoE decision and monetary policy report surprise the market and encourage volatility?

• After Trump put tariffs on Canada, Mexico and China, GBPUSD fell lower. Could this be the start of a move that takes GBPUSD below the psychologically important 1.2000 level?

EUR

• The European Central Bank (ECB) cut rates by 0.25% to 2.75% last week. ECB President Lagarde added that she expects the Eurozone economy to ‘remain weak in the near term’.

• President Trump has said that he will put tariffs on the EU, with his own deadline being April 1st, but could tariffs come sooner? With EURUSD slumping on the news, will we see 1.0000 soon?

• Early inflation readings kick the week off on Monday, with retail sales on Friday rounding things off.

USD

• President Trump put 25% tariffs on Canada and Mexico. Chinese goods are also now subject to additional 10% tariffs. Capital Economics' Chief North America Economist Ashworth said ‘ The window for the Fed to resume cutting interest rates at any point over the next 12 to 18 months just slammed shut’.

• On the tariff news, the US Dollar index jumped higher by around 1%.

• US payroll figures on Friday could be the important US data release this week. Will January’s reading show early signs of labour market weakness after the new administration took office?

Main events for this week:

Mon Feb 3

00:30 AUD Retail Sales

10:00 EUR CPI Flash Estimate

15:00 USD ISM manufacturing PMI

17:30 USD FOMC Musalem Speaks

Tue Feb 4

15:00 USD JOLTS job Openings

16:00 USD FOMC Bostic Speaks

18:15 USD FOMC Daly Speaks

21:45 NZD Employment Data

Wed Feb 5

13:30 USD Trade Balance

14:00 USD FOMC Barkin Speaks

15:00 USD ISM Services PMI

18:00 USD FOMC Goolsbee Speaks

Thu Feb 6

10:00 EUR Retail Sales

12:00 BoE Monetary Policy Report/Int Rate Decision

13:30 USD Unemployment Claims

19:30 USD FOMC Waller Speaks

20:30 USD FOMC Daly Speaks

Fri Feb 7

07:00 EUR German Industrial Production

12:15 GBP MPC Pill Speaks

13:30 USD Average Hourly Earnings/Non-Farm Payrolls/Unemployment Rate

15:00 USD Prelim UoM Consumer Sentiment/Inflation Expectations