Tariffs boost the USD, GBP remains strong ahead of a full data calendar next week

GBP: Maintaining strength against the Euro as markets favour the Bank of England’s policy of maintaining higher interest rates, whilst other economies have indicated rate cuts, which generally weakens a currency.

Markets are pricing 2 cuts in the UK, 3 cuts in Europe and the USA expected to cut by 0.6% in 2025.

GBP/USD hovering at 2025 highs near 1.2600 (despite the recent USD rebound) and GBP/EUR around 1.2100 - we continue to see UK importers taking this opportunity to hedge or partially hedge exposures at these levels as the medium-term risks to GBP remain.

USD: The Greenback found buying interest overnight, as Trump confirmed tariffs on China, Canada and Mexico, alongside an additional 10% levy on China to go into effect on March 4, reciprocal tariffs on April 2

On Wednesday, President Trump threatened to impose tariffs on the Eurozone. Trump said the tariffs will be announced “very soon,” and it will be 25% on “cars and other things”.

The market awaits Wednesday services data but the main focus will be on Friday’s monthly employment data.

EURO: The ECB is expected to deliver a rate cut next Thursday and Monday’s inflation data will be closely watched. It will be the 5th rate cut in a row, to 2.5% - prompted by inflation data and the effect of Trump’s tariffs, prompting a need for stimulus in the Eurozone.

After Thursday’s announcement, GDP data is released on Friday, with markets looking for a glimmer of hope.

AUD: The Central bank meeting minutes are published next Tuesday and will be looked at to determine the thinking behind this months rate cut, and some forward guidance. Wednesday sees GDP data published.