The pound saw mixed movements on Monday, slipping slightly against the euro while strengthening against the U.S. dollar. This came after European leaders reached an agreement on Sunday
to draft a Ukraine peace plan for discussion with the United States.
The euro is expected to be the biggest beneficiary of a potential peace deal in Ukraine, especially as Germany considers a substantial increase in fiscal spending.
On Sunday, UK Prime Minister Keir Starmer unveiled a £1.6 billion ($2 billion) agreement enabling Ukraine to acquire 5,000 air-defense missiles through export financing.
The euro edged up by 0.10% to 82.53 pence, recovering from last week's dip to 82.40 pence—its lowest level since December 19.
However, the euro has been under broader pressure after U.S. President Donald Trump threatened to impose a 25% tariff on European Union exports, including cars and other goods. Analysts suggest that while these protectionist measures will impact all European currencies, the pound may be somewhat less affected.
Meanwhile, the U.S. dollar weakened on Monday as investors focused on the prospects of a peace deal and increased fiscal spending within the eurozone.
Sterling posted its first monthly gain against the dollar since September, driven by expectations that UK interest rates will remain elevated for longer than those in other regions. By Monday, the pound had risen 0.3% on the day to reach $1.2614.
In Britain, wage pressures have heightened concerns about inflation remaining above the Bank of England’s target. Deputy Governor Dave Ramsden stated on Friday that while rate cuts might not need to be slow, inflation risks remain.
However, some analysts remain cautious about the pound's prospects. Francesco Pesole, a forex strategist at ING, warned that the recent rally against the dollar may be short-lived, anticipating that the upcoming UK budget announcement in late March could trigger renewed pressure on sterling, particularly due to concerns about the gilt market.
Looking ahead, the UK’s economic data calendar is relatively quiet this week. The main domestic event will likely be the Treasury Committee’s questioning of Bank of England Governor Andrew Bailey and other members of the Monetary Policy Committee on Wednesday.