Thursday's session was defined by a continued tug-of-war between ceasefire optimism and geopolitical reality. Iran's formal rejection of the US's 15-point peace plan meant that oil prices remained elevated enough for inflation fears to be a central topic of the Fed speakers last night.
The pound slipped versus USD throughout the day, which means that Monday’s boost for Sterling has completely unwound. Adding to the hawkish backdrop, a raft of Fed speakers appeared on the wires overnight. Several reinforced the message that the conflict's inflationary consequences cannot be ignored; with Jefferson and Barr flagging that a rate hike may be appropriate if energy prices remain elevated into Q2. Trump has also announced that the pause on “Energy Plant destruction” will be extended to 6th April.
UK Retail Sales disappointed this morning, falling to -0.4% for February’s month-on-month figure compared to 2% previously. This has added to the negative rhetoric and means the GBP starts the day on the back foot.
*Daily move - against G10 rates as of 17:00 GMT, 26.03.26
** Indicative rates - interbank rates as of 17:00 GMT, 26.03.26
With a sparse data calendar today, we can expect a continuation of the recent trends. Progress towards a ceasefire will be at the forefront of market attention. We know that Trump loves to post messages on Truth Social over the weekend, which could create volatility on the market open on Sunday evening.
Given the poor retail sales figures from the UK this morning, it would not be a surprise to see GBPUSD test the lows of the last 10 days, particularly if any of the Fed speakers this afternoon provides a more hawkish outlook than their colleagues last night.
EUR has been a bystander in the last few days and with only a speech from the ECB’s Schnabel today, it is likely that will continue.
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