Euro, pound off Friday’s lows vs $

Having hit fresh 2025 highs of $1.0955 and $1.3015 respectively in the middle of last week, the euro and sterling lost a fair amount of ground against the dollar thereafter – with the latter benefiting amid a renewed slide in equity markets – falling to lows just below $1.08 and $1.29 on Friday afternoon before recovering a little into the close of business. They are both firmer again at the open today, helped by talk that Trump’s reciprocal tariffs (due April 2) may be more narrowly focused than perhaps previously feared, trading at about $1.0850 and $1.2950. EURGBP fell to a low for the week of £0.8350 following Thursday’s Bank of England (BoE) meeting but has clawed back a bit of ground since to trade at about £0.8375 this morning.

After last week’s Fed and BoE meetings, which saw policy kept on hold at both, rate cut expectations firmed in the case of the former, with the market now pricing in about 60bps for the remainder of 2025, but were pared back in the case of the latter, with less than 50bps expected for the rest of the year. This in turn contributed to a decline in US government bond yields, which fell by 6-7bps on the week, and an increase in UK yields, which rose by around 6-9bps. Elsewhere in bond markets, there was a notable decline in German 10-year yields, which fell by more than 10bps, reversing some of the sharp rise that occurred over the previous two weeks following the announcement of increased infrastructure/defense spending.

While it was something of a week of two halves for equity markets, they still managed to eke out small gains overall. European stocks added just shy of 0.5% on the week, while the S&P 500 ended higher for the first week in five, adding around 0.5%.

Looking to the week ahead, economic data due include flash PMIs for March in the main economies today; CPI inflation and retail sales in the UK on Wednesday and Friday respectively; and PCE inflation and consumer spending in the US on Friday. On Wednesday, UK Chancellor Rachel Reeves delivers her Spring Statement in Parliament, with reports that she will announce public spending cuts of £10bn to meet her fiscal rules.