Markets on Edge: Eurozone Inflation, US Payrolls & Sterling Under Pressure

Key Highlight

• The recent climb in oil prices is adding fresh doubt to expectations for upcoming rate reductions.

Market Recap

The US dollar extended its recent gains as geopolitical tensions escalated following firm rhetoric from Iranian official Ali Larijani, who signalled Tehran would not engage in talks with Washington. Sentiment deteriorated further after Donald Trump stated military action would persist until objectives are achieved, reinforcing a clear risk-off tone across markets.

Commodities & Safe Havens

Brent crude climbed back above $78 per barrel, highlighting the close relationship between rising energy prices and USD strength. Elevated oil prices have supported the dollar while adding pressure to energy-importing economies.

Interestingly, beyond gold, the US dollar was one of the few traditional safe-haven assets to attract demand.

The Japanese yen weakened, pressured by higher oil costs and cautious commentary from Bank of Japan official Ryozo Himino.

The Swiss franc also softened, with markets wary of potential intervention from the Swiss National Bank.

What This Means

Heightened geopolitical risk is driving defensive positioning, with the dollar emerging as the primary beneficiary. Currency volatility may remain elevated while uncertainty persists, particularly for GBP/USD, which is currently hovering near its lowest levels of 2026.

Market Update

Eurozone – Inflation in Focus

The primary risk event for the euro this week is February CPI. Inflation is already running below the European Central Bank’s 2% objective, so any further slowdown could intensify speculation around renewed policy easing or at least increase pressure on the Governing Council.

While PMI surveys and unemployment data will help shape the broader growth narrative, the credibility of the inflation outlook remains the dominant theme for EUR direction. Expect the single currency to stay highly sensitive to both the headline print and commentary from ECB officials.

United States – Labour Market & Demand Signals

Attention shifts to February nonfarm payrolls, the unemployment rate and retail sales data. Current expectations point to moderate job growth (around 60k) and unemployment holding near 4.3%.

Weather-related distortions may impact the headline figures, but markets are unlikely to react strongly to softer data alone. The more important consideration will be whether underlying inflation pressures remain aligned with the Federal Reserve’s 2% target. In particular, investors will watch unit labour costs and ISM price components closely.

The US dollar is likely to respond to any material data surprises, alongside broader shifts in risk sentiment.

United Kingdom – Politics Adding a Premium

Sterling continues to carry a degree of political risk following last week’s Gorton and Denton by-election results, which have contributed to wider uncertainty around Keir Starmer’s leadership.

Although domestic PMI data points to underlying economic resilience, political headlines could generate sharp and sudden moves in GBP.

Overall Market Tone

Following weekend developments, markets are expected to open cautiously, with safe-haven flows favouring the US dollar.

Softer risk appetite could keep pressure on sterling in particular, with GBP/EUR trading near levels last seen in December 2025 and GBP/USD hovering close to its 2026 lows.

02nd March 2026

How We Can Help...

Our team are here to help you get more from your money when making international payments. We will work with you to understand your payment needs and offer guidance on the best options available to you.

Get in Touch!

P: 07441 910 897

E: FX-Admin@frank-exchange.com

This document has been prepared solely for information and is not intended as an Inducement concerning the purchase or sale of any financial instrument. By its nature market analysis represents the personal view of the author and no warranty can be, or is, offered as to the accuracy of any such analysis, or that predictions provided in any such analysis will prove to be correct. Should you rely on any analysis, information, or report provided as part of the Service it does so entirely at its own risk, and Frank eXchange Limited accepts no responsibility or liability for any loss or damage you may suffer as a result.  Information and opinions have been obtained from sources believed to be reliable, but no representation is made as to their accuracy. No copy of this document can be taken without prior written permission.