Pound Sterling (GBP) may begin to weaken in March, according to an FX analyst. The GBP/USD exchange rate is unlikely to maintain gains above 1.26.

This week, UK Prime Minister Starmer is set to meet Trump in Washington, which could generate positive press due to the UK’s commitment to increase defence spending by 2027. The market perceives the UK as relatively resilient amid trade tensions, with short-term risks for EUR/GBP potentially leaning downwards.

The outlook remains focused on a lower GBP/USD, casting doubt on the currency’s ability to retain its current levels.

The suggestion that the pound could weaken in March is not without reason. If GBP/USD struggles to maintain a position above 1.26, traders may begin adjusting their strategies accordingly. A lower exchange rate raises concerns about the sustainability of recent strength, particularly if market conditions do not provide fresh support.

Keir’s meeting with Donald has the potential to steer sentiment, especially due to the pledge to boost defence spending by 2027. The optics of such a trip matter – reaffirming ties with the US at a time when global trade tensions remain high could benefit Britain’s perception as a steady partner. But while this may foster some short-term confidence in sterling, it does not necessarily counterbalance the broader pressure leaning towards a weaker GBP/USD.

In contrast, those watching EUR/GBP may have noted that near-term risks remain skewed to the downside. If the pound retains some resilience against the euro, it could offer relief for those positioned accordingly. However, this does not change the bigger trend—caution remains warranted regarding sterling’s overall trajectory.

Given recent market conditions, traders should remain aware of these dynamics. If GBP/USD begins to slip, it might reinforce the idea that sterling’s current position is unsustainable. Without new drivers of strength, a drift lower could be the more natural path.

Hamas is preparing its military forces for a possible resurgence in hostilities with Israel as the cease-fire is set to lapse this weekend. Reports indicate that Hamas’ armed wing has appointed new commanders and is strategising the positioning of fighters.

Efforts are ongoing to maintain the cease-fire, with mediators actively involved. In addition, Hamas has initiated repairs on its underground tunnel network and is providing training materials to new fighters for guerrilla warfare tactics against Israel.

Attention from markets is likely to focus on oil due to the potential for price increases amid these developments.

Traders will need to consider the effects of these developments on oil markets. Geopolitical risks often drive fluctuations in energy prices, and tensions between Israel and Hamas have historically influenced supply concerns. If the cease-fire collapses, the likelihood of increased instability in the broader region could prompt volatility in crude futures.

Washington has already expressed concerns over the situation, urging restraint from both sides while working with regional partners to prevent escalation. However, past conflicts indicate that if violence resumes, the impact may not be isolated. With the Middle East being a key producer in global energy markets, even the perception of disruption can push prices upward.

Brent crude has already displayed sensitivity to geopolitical shifts this year. If supply chains are threatened, even indirectly, traders holding short positions in crude could face difficulty. We recall previous conflicts having swift effects on energy markets, requiring positioning adjustments in response. As such, anticipating potential surges—before confirmation of actual disruptions—tends to be a recurring theme during these periods.

Beyond energy, defence-related equities may see increased interest. We remember how previous escalations led to heightened investor attention on firms rooted in security and aerospace industries. If exchanges react similarly this time, some may look for opportunities in stocks tied to military technology and defence contracts, given expectations that governments in the region could raise procurement levels.

While discussions continue in diplomatic circles, those involved should be aware of how sentiment can shift quickly. Reactionary price movements can follow headlines rather than concrete changes on the ground. Observers may find it valuable to monitor updates from policymakers, as any remarks related to de-escalation or intervention could influence short-term trends.

Oil prices experienced a sharp decline yesterday, with Brent crude falling below USD74 per barrel, according to Danske Bank’s analyst Jens Nærvig Pedersen. This downturn seems linked to weakened risk sentiment, influenced by lower US consumer confidence figures released on the same day.

The oil market remains under pressure, with concerns over demand overshadowing potential supply worries stemming from tightened sanctions on Iran’s oil export. Additionally, the broader energy sector has faced challenges, as European natural gas prices have also retreated from recent highs.

This drop in oil prices adds to ongoing concerns within commodities, particularly as demand uncertainty continues to weigh heavily on sentiment. Jens notes that weaker consumer confidence in the US has amplified fears about lower spending, which in turn could dampen energy consumption. The fact that this aligns with an already fragile outlook only deepens worries among traders.

From our perspective, the reaction in markets shows how sensitive oil remains to economic signals rather than just supply constraints. Despite tighter sanctions on Iranian exports, which under different conditions might have pushed prices higher, the prevailing mood on consumption is outweighing any potential supply risks. That tells us a lot about the way investors are positioning themselves right now.

At the same time, natural gas markets in Europe have not been immune to this shift. A pullback in prices there suggests that short-term demand is not as strong as anticipated, or that previous supply fears were overstated. This is worth watching, as gas prices had been climbing in recent weeks on potential disruptions.

For those navigating derivatives in the coming weeks, the focus should be on demand-side developments rather than just supply risks. Traders need to monitor consumer confidence indicators closely, not only from the US but also from other major economies, as these are shaping sentiment more than geopolitical constraints. Additionally, recent movements suggest that even when supply risks appear, they may not result in sustained price increases if overall demand factors remain weak.

As we move forward, keeping an eye on how broader economic data feeds into energy is essential. If more signs of weak consumption emerge, particularly from large importing nations, it could reinforce downward pressure. Conversely, any positive shifts in consumer sentiment might help steady prices, but only if they indicate a real increase in energy use. This balance is what will likely drive price action in the near term.

On Monday, Trump indicated that tariffs on Canada and Mexico would proceed, stating they are “going forward on time.”

On Tuesday, the White House clarified that Trump was talking about a different set of retaliatory tariffs on various countries.

The proposed 25% tariffs on Mexico and Canada, set to be implemented on March 4, have not yet been confirmed.

This sequence of statements has introduced confusion around trade policy. When Trump said tariffs on Canada and Mexico would move ahead as planned, it initially seemed like confirmation that the 25% tariffs scheduled for March 4 were certain. However, the White House later clarified that he was actually referring to a separate group of retaliatory measures against other nations. At this point, it is not guaranteed that the March 4 tariffs will be enforced.

Market reactions tend to be swift when trade restrictions are discussed. Even uncertainty alone affects pricing. When tariffs of this scale appear likely, companies adjust their expectations. Some traders act immediately, while others wait for official confirmation. The potential for sudden changes in price movements increases, particularly in sectors most directly exposed.

Trump’s stance on trade has frequently shifted in response to negotiations and broader economic conditions. Because of this, any statement on tariffs should be considered in context with previous positions. Policy announcements from this administration have, at times, been reversed within days. Those watching closely have learned to focus on actual implementation rather than initial rhetoric.

Over the next few weeks, market participants will be looking for more than just verbal commitments. If full confirmation of the March 4 tariffs does not come soon, some may reconsider their positions. Adjustments will depend on whether further comments provide clarity or introduce more uncertainty.

Statements from White House officials will also be closely examined. If there is any suggestion of exemptions or delays, expectations could shift dramatically. Even a slight adjustment to tariff plans would have implications for how supply chains react. Companies that rely on cross-border imports would need to recalibrate their short-term decisions.

When markets process information like this, reactions are rarely uniform. Some traders adjust instantly, while others wait for official action. The longer there is ambiguity, the greater the opportunity for rapid price shifts when confirmation arrives. If no clear signal is provided soon, speculation could take hold, leading to short bursts of volatility.

For those making decisions in this space, the priority is separating rhetoric from concrete action. Any meaningful change to trade policy will not only affect pricing but also influence broader sentiment. Watching official announcements closely, rather than relying on brief remarks, will be the most reliable approach.

The Pound Sterling (GBP) shows potential for further rebound; however, it lacks sufficient momentum to reach 1.2730 against the US Dollar (USD). A drop below 1.2580 could suggest that the target of 1.2730 is unattainable at this time.

Recently, GBP fell from a high of 1.2690 two days prior, closing at 1.2666, a gain of 0.32%. Resistance levels include 1.2700 and 1.2730, with support at 1.2655 and 1.2635.

Despite a generally positive outlook for GBP over the next few weeks, upward momentum appears to be waning. A clear breach above 1.2730 is necessary for any further upward movement.

What we see here is that the Pound has shown some resilience, but that doesn’t mean it has enough strength to push much further without a solid catalyst. The recent retreat from 1.2690 suggests that buying pressure, while present, isn’t overwhelming. The fact that the currency closed at 1.2666 still reflects a net gain, but this comes with fading momentum.

Now, if prices slip below 1.2580, traders should take note. That would imply buyers are struggling to keep control, and it would shift expectations away from a move towards 1.2730. The fact that this target remains elusive unless there’s a decisive break above it means traders should hold back from assuming further upside is guaranteed.

Resistance levels are an area to be aware of. At 1.2700, we may see selling pressure increase, and that only intensifies closer to 1.2730. On the other hand, 1.2655 and 1.2635 are areas where buyers may attempt to step in again. If either of these support levels fails, it adds more weight to the argument that the Pound’s recent climb might be running out of steam.

The overall picture still leans towards some potential for gains, but confidence in further strength is not as solid as it was. Any move beyond 1.2730 would shift this entirely, opening the door for further advances. Without that, however, traders should be prepared for the possibility that the currency remains capped in the near term.

Donald Trump is scheduled to address the media at 9am US Eastern time.

He will then attend a Cabinet Meeting at 11am.

Later in the day, Trump will sign additional executive orders at 3pm.

On February 4, he signed an executive order related to Iran.

This schedule comes at a time when markets are reacting to broader economic signals and policy decisions from Washington. His remarks at 9am may include references to recent economic data, trade discussions, or other policy matters that could shift market sentiment. A strong or unexpected statement could move prices when markets open, particularly for assets sensitive to government policy.

The Cabinet meeting at 11am could provide further clarity on the administration’s approach to economic and geopolitical concerns. While the discussion itself will not be public, any statements given afterwards may hint at policy shifts or reinforce previous positions. Traders will be watching closely for any indications of adjustments in fiscal or regulatory plans.

Later in the afternoon, the signing of additional executive orders at 3pm introduces another moment that could push markets one way or the other. Executive orders have previously influenced key sectors, from energy to finance, and whatever is signed today may do the same. Past actions suggest decisions related to international trade, domestic regulation, or federal spending could be on the table.

Earlier this month, Donald signed an executive order related to Iran, which held implications for sanctions and broader market dynamics. Iran’s role in energy markets means any future decisions regarding that region could impact pricing in multiple asset classes.

Volatility around key announcements has been a feature of recent sessions. The next few weeks are likely to bring further reactions as different pieces of policy take shape. Those of us engaged with short-term moves will need to keep an especially close eye on what is said and done at these scheduled events.

The USD/JPY currency pair is trading near 149.40, with potential resistance expected due to anticipated interest rate hikes by the Bank of Japan. Traders are awaiting key Japanese economic reports on industrial production, retail sales, and Tokyo inflation, which are scheduled for release on Friday.

The Bank of Japan is projected to increase rates to 0.75% this year, with a full rate hike priced in by September and a 50% chance of an earlier move by June. Meanwhile, the US Dollar is gaining strength, driven by rising US Treasury yields, with the US Dollar Index approaching 106.50.

Currently, the 2-year and 10-year US Treasury yields stand at 4.11% and 4.32%, respectively. Additional economic developments include US President Donald Trump’s investigation into tariffs on copper imports and the confirmation of tariffs on Canada and Mexico after a one-month delay.

The Japanese Yen’s value is influenced by various factors, including the Bank of Japan’s policies, bond yield differentials, and broader market risk sentiment. The gradual unwinding of the Bank of Japan’s ultra-loose policies has recently supported the Yen against its peers.

At the moment, the USD/JPY pair is hovering near 149.40, yet resistance could emerge as traders react to expected rate hikes from the Bank of Japan. Many are watching closely for Friday’s economic data, which includes reports on industrial production, retail activity, and inflation in Tokyo. These releases should provide further clues on whether policymakers will indeed act on interest rates sooner rather than later.

Market expectations suggest rates in Japan will rise to 0.75% before the year’s end, with September fully priced in. There’s also a one-in-two chance of a move as early as June. If these forecasts hold, it could shift investment flows, influencing the Yen’s performance. On the other hand, the US Dollar has been strengthening, mainly because of rising Treasury yields. As it stands, the US Dollar Index is moving towards 106.50, supported by higher returns on government bonds.

Right now, the 2-year Treasury yield is at 4.11%, while the 10-year yield is slightly higher at 4.32%. These levels matter because yield differentials often dictate currency movements. If US yields keep rising while Japan’s remain low, capital is more likely to favour dollar-denominated assets. However, should Japan’s central bank take a firmer stance, the Yen might resist further weakening.

Elsewhere, US President Donald Trump has announced an investigation into tariffs on copper imports, an issue that could play into broader inflationary concerns. Meanwhile, after delaying them for a month, tariffs on Canada and Mexico have now been confirmed. Developments such as these ripple through various asset classes, particularly commodities and equities, which, in turn, influence currency markets.

Sentiment around the Japanese Yen is tied to multiple factors, including central bank policy, interest rate spreads, and overall market risk appetite. Over recent months, the unwinding of Japan’s extremely loose monetary stance has given the Yen some backing. Whether that continues depends on how policymakers proceed and how global investors react to upcoming data points.

January’s inflation data showed a y/y rate of 2.5%, slightly below estimates, consistent with the previous month, and in line with the Reserve Bank of Australia’s 2-3% target range. The core Trimmed Mean reading increased to 2.8% from December’s 2.7%.

These figures suggest that a rate cut by the Reserve Bank of Australia is unlikely in the near future, with attention on forthcoming quarterly data set for late April.

The AUD initially rose against the USD before declining, while the JPY followed a similar trend, falling to lows under 148.70 before recovering to around 149.50.

In the US, the House passed a budget bill supporting Trump’s 2025 agenda, which includes extending tax cuts and increased military spending. Chinese equities performed strongly, both on the mainland and in Hong Kong.

This latest inflation data reinforces the expectation that borrowing costs will remain steady in the short term. The central bank has little reason to lower rates while inflation stays within its preferred range. The uptick in the core measure hints at persistent price pressures, even though the overall annual figure remains stable. Markets will scrutinise the next set of quarterly figures in April for further confirmation of trends.

Initially, the currency’s jump suggested that traders interpreted the inflation figures as reducing the likelihood of an early rate reduction. However, the subsequent reversal indicates that other factors, such as broader risk sentiment and shifts in the US dollar, weighed on its performance by the end of the session. The movement in the yen followed a comparable pattern, with a dip below 148.70 before a recovery closer to 149.50. Changes in interest rate expectations, as well as external forces like US policy developments and global demand for safe-haven assets, contributed to the currency’s volatility.

In Washington, the House’s approval of a budget package aligned with Donald’s 2025 economic strategy added to market discussions around fiscal policy. Extending the current tax structure and directing more funds towards national defence remain core components, reinforcing higher government spending patterns. This approval process is being watched for its implications on growth and debt projections in the coming years.

Meanwhile, shares in Shanghai and Hong Kong extended their gains, aided by improved sentiment and signs of policy support. Stronger liquidity conditions and optimism surrounding economic measures helped sustain this momentum. Investors have shown a preference for beaten-down sectors as confidence in the local market recovers. The trajectory in these indices could influence broader risk appetite, particularly in the region’s related asset classes.

In January, South Africa’s Consumer Price Index (CPI) rose to 0.3%, up from the previous figure of 0.1%. This increase indicates a slight uptick in inflationary pressure.

EUR/USD traded around 1.0500 as it recovered from previous losses amidst a stronger US Dollar. GBP/USD likewise decreased towards 1.2650, reflecting ongoing challenges from the dollar’s firmness.

Gold prices stabilised above $2,900 following recent declines, spurred by concerns over US economic data. In the crypto sector, Maker’s price saw gains of nearly 12%, even as the overall market faced downturns.

Upcoming economic reports may centre around the implications of Germany’s elections and inflation figures important to the Federal Reserve.

A rise in South Africa’s CPI from 0.1% to 0.3% points towards a mild increase in inflation, which may influence policy expectations. If this trend continues, it could eventually affect interest rate decisions.

The euro’s movements against the US dollar reflect an ongoing struggle to regain momentum. Trading near 1.0500 suggests the recovery remains fragile. The British pound, sliding towards 1.2650, highlights that traders are still positioning based on the dollar’s strength rather than any inherent weaknesses in sterling itself.

Gold holding steady above $2,900 signals that investors remain cautious. Its price action has been shaped in part by US economic data, which continues to shift expectations on interest rate policy. If inflation in the US surprises, gold’s movements could become more volatile.

In crypto, Maker climbing nearly 12% is an outlier. Broader market sentiment has leaned negative, yet certain assets have defied this trend. When a singular token moves against the broader direction, it’s worth assessing whether it’s driven by internal factors, such as protocol developments, or speculative positioning.

Looking ahead, upcoming reports linked to Germany’s elections and fresh inflation data for the Federal Reserve will be closely monitored. Inflation numbers carry weight for rate expectations, and any surprises might influence broader market positioning. Those trading derivatives need to remain alert to these shifts, as they could dramatically alter price action across multiple asset classes.

Swati Dhingra, an external member of the Bank of England’s Monetary Policy Committee, is scheduled to speak on 26 February 2025 at 1630 GMT (1130 US Eastern time).

The event will occur at Britain’s National Institute of Economic and Social Research and will address trade fragmentation and its effects on monetary policy. Dhingra’s views generally align with a more accommodative stance within the committee.

Swati’s upcoming speech presents an opportunity to gain a deeper understanding of how she assesses wider economic shifts affecting monetary policy. Given her preference for a more accommodative approach, any reference to inflation persistence, labour market trends, or global trade disruptions will be relevant. If she acknowledges easing price pressures, this could reinforce expectations that rates may need to be adjusted earlier rather than later. Conversely, if she highlights lingering inflationary risks, markets will likely reassess the probability of near-term policy shifts.

Earlier statements suggest she has been wary of overtightening, arguing that economic slack could become a concern if borrowing costs remain too restrictive. Any indication that she views current settings as overly restrictive would strengthen the case for policy adjustments in the months ahead. However, if she signals patience, it would suggest that she believes further evidence is needed before changes should be made.

While broader discussions on trade fragmentation might seem detached from immediate policy decisions, they could offer insight into structural pressures shaping inflation trends. If she links ongoing trade disruptions to supply-side inflation, markets may take note, especially if she suggests this could limit the speed at which inflation moderates. On the other hand, if she argues that trade shifts might relieve pricing pressures over time, this would lend weight to expectations for adjustments sooner rather than later.

Other members of the committee have expressed varying opinions on when and how policy should respond to changing conditions. Should Swati’s speech align more closely with the more cautious voices, expectations of swift policy shifts may weaken. However, if she diverges from recent cautious remarks and leans towards earlier action, that will confirm her stance on the direction she believes monetary policy should take.

It will be essential to assess not just her broad statements but also the finer details. Any mention of specific data points, such as wage growth, consumer spending, or global supply chains, will provide further clarity on how she interprets recent trends. If she emphasises uncertainty, it may mean patience is warranted. Should she focus on downside risks to economic activity, this would reinforce arguments favouring adjustments sooner rather than later.

While Swati’s influence within the committee may not be decisive, her remarks will help shape expectations. Markets will be keen to gauge whether her tone shifts in response to recent data, and any divergence from prior comments will not go unnoticed. The reaction will depend on whether she signals that current conditions warrant faster adjustments or if she believes there is still more to assess before taking action.