European Monetary Policy

The euro has gained 14% against the US dollar in 2025, while the pound has risen 7%, as the Dollar Index fell 10.8% in the first half of the period. Currency analysts are monitoring GBP/USD levels around $1.30 amid persistent dollar weakness and an upcoming Federal Reserve leadership transition as Jerome Powell prepares to step down.

The Bank of England is expected to deliver rate cuts in March 2026 with 84% probability, leading a coordinated global easing cycle as inflation moderates across major economies. European central banks are following suit, while the Federal Reserve faces leadership uncertainty with Powell and Miran terms expiring. RSM projects two cuts for 2026, though sticky services inflation remains above target levels.