The British Pound retraced the majority of its recent losses on Friday, a move that could be linked to the current risk-on market mentality. However, fresh obstacles have emerged as a result of the announcement of disappointing UK retail sales figures for December. Indeed, the considerable reduction in consumer spending may make it difficult for the BoE to sustain a restrictive policy without risking an economic downturn.

The Euro appears to be holding its recent gains, as ECB Governing Council members have been hesitant about prematurely loosening financial conditions. Looking ahead, no changes are expected at the January policy meeting on Thursday, the 25th. Nonetheless, markets will closely watch ECB President Christine Lagarde’s speech to see if she confirms the first rate reduction of the year.

The US dollar remained stable last week as market players were less convinced that the Federal Reserve would decrease interest rates in March. The adjustment in expectations follows last week’s economic statistics, which showed an uptick in the US economy. According to the CME Fed Watch Tool, the odds of a cut at the March meeting have dropped to 49.3%, down from 81% just a week ago.

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