The euro edged up to $1.031, recovering slightly after seeing 1.0250 last week, as investors reacted to the EU's tough stance against US tariffs on European steel and aluminum. The EU has pledged to retaliate against US tariffs on European steel and aluminum, with European Commission President Ursula von der Leyen calling them "unjustified" and promising firm countermeasures. German Chancellor Olaf Scholz warned that Europe would react "within the hour" if tariffs were imposed. US President Donald Trump ordered 25% tariffs on steel and aluminum imports on Monday.

Meanwhile, the ECB recently cut rates and hinted at further easing in March, with markets now expecting the deposit rate to fall to 1.87% by the end of the year. On the other hand, good US employment figures have reinforced the Federal Reserve's stance of holding rates steady for the time being. Pressure is likely to remain on the EUR for at least several more weeks before any weakness in US economic figures is seen.

For its part, the EURGBP fell below 0.8300, with sterling confirming its strength in 2025, as markets adjusted their rate cut expectations following comments from BoE policymaker Catherine Mann. Although Mann voted for a 50bp cut at the last meeting, she made it clear that this was not a signal for further aggressive easing, but rather a move to "cut through the noise" and improve communication with global markets. She stressed the need to maintain a restrictive monetary policy, citing the structural challenges of getting inflation back to 2%.

As a result, markets have reduced their bets on deeper cuts, now expecting an easing of around 62 basis points in 2025. Investors are now awaiting key economic data, including GDP estimates for December, preliminary Q4 figures and industrial and manufacturing production for December.