Sterling firmed on Tuesday after the Trump administration opened a criminal investigation into Fed Chair Jerome Powell. The president has the dented currency's safe-haven status since he started a trade war.
Britain's consumers reined in their spending in December by the most in almost five years, according to debit and credit card data from Barclays published, adding to other signs of household caution before Christmas.
Separate figures from the report also painted a weak picture with sales growth among retailers slowing for the fourth month in a row. That reflected worries about sticky inflation.
The EU is reportedly demanding guarantees the UK will compensate the bloc if a future government reneges on the Brexit "reset" agreement PM Starmer is currently negotiating.
It is seen in some quarters as a means of ensuring the bloc is not left out of pocket should the Reform leader win a general election and make real his threat to cancel any UK-EU sanitary and SPS agreement.
BofA forecasts continued downside for EUR/GBP in 2026, maintaining its year-end target of 0.84 despite potential political headwinds. Incremental improvements to UK productivity is viewed as bullish for the pound.
The pair was trending lower towards its 200 SMA, the level which could act as support around 0.8640. We see an at least moderate rally could occur around the corner.
Asset recap
As of market close on 12 January, among EBC products, United States Natural Gas Fund ETF led gains. This shift is significant as gas prices have started factoring in weather risks once more.
Gold and silver prices hit their fresh all-time peaks amid renewed concerns over the Fed's independence. Silver was also lifted by ongoing supply tightness as US tariffs drained inventories.
Hong Kong stocks rallied, lifted by gains in healthcare and technology shares. China's consumer inflation accelerated in December to the fastest pace in nearly three years as spending picked up ahead of the New Year holiday.
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