Published: 02/01/2026 By ECAP
QUIET MARKETS
The British Pound has edged higher in thin year end trading, reaching two-month highs after pushing above a key technical average that has capped recent gains. Momentum looks constructive, but low liquidity limits conviction. Equity market momentum has stalled, restricting further advances. Over coming months, sterling remains vulnerable as a cooling labour market may prompt rate cuts, keeping rallies shallow unless January data surprises positively in early 2026.
The Euro traded near a key technical area, supported by improved geopolitical sentiment but constrained by subdued equity momentum. Optimism around a potential Russia Ukraine peace agreement continued to underpin confidence, though gains remained limited by unresolved issues. Light year end trading reduced conviction, leaving the Euro consolidating near recent highs. Future direction may depend on renewed risk appetite, equity market momentum and whether peace expectations for 2026 remain credible.
The U.S. Dollar remained largely range-bound in quiet year-end trading but found late support from investor repositioning. Sentiment improved after Federal Reserve minutes signalled caution on near term policy easing and openness to holding rates steady. Expectations of future cuts continue to limit upside potential, while longer term headwinds include fading confidence in US institutions, increased hedging of American assets and risks of political pressure influencing monetary policy.
Data supplied by GC Partners