Published: 09/01/2026 By ECAP
EXTERNAL INFLUENCE
The British Pound has had a strong start to 2026 seeing an extension to the post budget relief rally before recently meeting market resistance and mild profit taking. Recent softness has been driven by a lack of UK data, mixed reports from retailers over Christmas leading to concerns over growth but mostly has been driven by factors elsewhere. Overall, although the Pound has had a strong start, there remains political uncertainty, longer term fiscal risks and external uncertainty which tempers confidence.
The Euro has firmed thus far in 2026 with recent support being driven by indicators showing that industrial conditions are improving. German factory orders showed strong data which has boosted confidence that the EUs largest economy may be recovering from a prolonged period of downturn, alongside that is the rising defence demand helping to support industry and economies. However, markets remain cautiously optimistic due to fragile business sentiment, geopolitical tensions and security concerns in Greenland which limit optimism.
The U.S. Dollar has found support due to growing safe haven demand amid escalating geopolitical tensions. Investor caution/uncertainty has lifted the currency, however gains were limited as markets are avoiding overly aggressive positioning ahead of key US data. Markets now look towards non-farm payrolls and consumer sentiment releases which have the ability to influence Federal Reserve rate cuts (and corresponding market expectations) alongside wider market volatility.
Data supplied by GC Partners