By James Caley
Sterling traded in relatively contained ranges last week, with GBP/EUR and GBP/USD lacking clear direction as markets digested a mixed run of European data. In Germany, February’s Ifo Business Climate disappointed, while GfK consumer confidence remained deeply negative. French preliminary inflation slowed sharply year on year, while German inflation edged slightly higher. The overall impact was limited sustained momentum in EUR crosses, leaving GBP/EUR broadly rangebound for much of the week.
Against the dollar, GBP/USD saw modest volatility but no decisive breakout. The US backdrop remained broadly supportive, with markets continuing to price a cautious Federal Reserve stance. However, sentiment deteriorated into the end of the week, with Friday proving the weakest session overall. Both GBP/USD and GBP/EUR closed below their respective weekly trading averages, leaving sterling on the back foot heading into March. EUR/USD also eased into the close, reflecting a modest late week bid for the dollar.
Looking at data this week, the primary focus will be on the United States. ISM Manufacturing data is due early in the week, followed by ISM Services, with Friday’s Non Farm Payrolls report the clear headline event. As ever, wage growth and the unemployment rate will be key for dollar direction. A stronger than expected labour market reading could reinforce recent dollar resilience, while any downside surprise may quickly unwind last week’s late USD strength.
In Europe, retail sales data is scheduled mid week, which may offer insight into consumer resilience across the bloc. For sterling, the UK calendar is relatively light, meaning GBP crosses may be driven more by external factors, particularly US data and broader risk sentiment. With last week finishing on a softer tone, markets will be watching closely to see whether that downside momentum extends as we move through the first full trading week of March.