Sterling remains under pressure as USD strength builds and Bank of England rate cut expectations continue to shift. Rising energy prices and persistent inflation risks are keeping markets on edge, with volatility picking up across major FX pairs.
Key Highlight
- Inflation worries are beginning to resurface across financial markets.
Market Recap
The US dollar remains well supported this morning as geopolitical tensions continue to drive sentiment. Comments from Donald Trump, pledging to do “whatever it takes” and signalling a willingness for conflict to persist, have kept energy prices elevated. Higher oil is feeding inflation concerns, prompting another sell-off in global government bonds and pushing yields higher.
Rate expectations are adjusting accordingly. Markets now assign just a 32% probability of a Bank of England cut this month, while pricing has shifted to reflect a small chance of an ECB rate hike before year-end — a notable change in tone compared to earlier easing expectations.
In Asia, Michelle Bullock, Governor of the Reserve Bank of Australia, emphasised that inflation remains a concern and reiterated that every policy meeting is “live,” reinforcing a cautious global central bank backdrop.
Market Update
The US dollar remains well supported this morning as geopolitical tensions continue to drive sentiment. Comments from Donald Trump, pledging to do “whatever it takes” and signalling a willingness for conflict to persist, have kept energy prices elevated. Higher oil is feeding inflation concerns, prompting another sell-off in global government bonds and pushing yields higher.
Rate expectations are adjusting accordingly. Markets now assign just a 32% probability of a Bank of England cut this month, while pricing has shifted to reflect a small chance of an ECB rate hike before year-end — a notable change in tone compared to earlier easing expectations.
In Asia, Michelle Bullock, Governor of the Reserve Bank of Australia, emphasised that inflation remains a concern and reiterated that every policy meeting is “live,” reinforcing a cautious global central bank backdrop.
Data & Event Risk Today
What This Means
- Elevated geopolitical risk is supporting USD through safe-haven deman
- Rising energy prices are complicating the inflation outlook, limiting scope for near-term rate cuts.
- GBP remains sensitive to domestic fiscal signals and shifting rate expectations.
- Central bank commentary today could trigger volatility if guidance diverges from current market pricing.
03rd March 2026
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