Published: 21/01/2026 By ECAP
INFLATION FOCUS
The British Pound has seen very little movement this morning after UK inflation surprised on the upside. Headline CPI rose to 3.4% in December, above expectations, with services inflation also higher. The data supports the view that price pressures remain sticky, even as the labour market softens. This should keep the Bank of England cautious on further rate cuts in the near term. Attention now turns to how inflation evolves through the rest of Q1 as growth momentum remains fragile.
The Euro is firmer as investors continue to reduce exposure to US assets following escalating trade tensions between the US and Europe. Threats of tariffs linked to Greenland have revived a broader “Sell America” theme, supporting the single currency. While recent Eurozone data has taken a back seat, the Euro is benefiting from its perceived safe-haven status relative to the Pound during periods of global risk aversion.
The Dollar is under pressure as political uncertainty and renewed tariff threats from the White House weigh on sentiment. Markets have reacted sharply to concerns over US/EU trade relations, triggering a selloff in equities and a broad decline in the Dollar. For now, geopolitical developments are dominating price action, with economic data taking the back foot until tensions show signs of easing.
Data supplied by GC Partners