The past week in the foreign exchange market saw limited movements, with the cable facing strong resistance at around 1.2000 and 1.2150 despite the release of notable data, such as the PMI services and manufacturing data for the G3, which named the UK as the surprise winner. Investors seem to be holding their cards close to their chest, assessing the likely economic conditions moving forward this year, causing the markets to be stagnant. However, there is an expectation that there will be a sudden change in sentiment once the picture becomes clearer for how quickly deflation is likely to take place, with the USD likely to see heavy losses against the GBP and EUR should forecasts be correct.

Looking ahead, the second week of March is expected to be the real point of contention, with employment data in the US closely watched by traders. The current economic climate is challenging, with Covid 19, Brexit, the Ukraine-Russia war, natural disasters, and political turmoil creating a perfect storm of difficult conditions. Despite this, there is a sense of quiet optimism as economies around the world appear to be outperforming forecasts and potentially avoiding recession.

Closer to home, two major talking points have been the Northern Ireland protocol and Nicola Sturgeon stepping down as leader of the SNP. Rishi Sunak appeared to have made a breakthrough with post-Brexit trade deals, but problems persist, and Nicola Sturgeon’s time as SNP leader has come to an end, with her dream of an independent Scotland seemingly losing traction. The UK’s political turmoil shows no signs of stopping anytime soon.