The established principles of the rules-based global economy are shifting as geopolitical and economic challenges evolve. Growing macroeconomic turbulence is causing significant volatility across markets, making the art of forecasting increasingly difficult.
Amid this uncertainty, sterling and euro investors are intensifying their quest for stability, liquidity and resilience in markets that are increasingly buffeted by fears of rising inflation (stagflation in the UK) and interest rate hikes.
The volatility is all too apparent. Sterling, for example, rapidly went from being the second strongest major currency of 2024 to slumping against the dollar and euro in January. At the same time, 30-year gilt yields spiked to their highest levels in more than a quarter of a century.
Then in February, sterling rallied on news that the UK had narrowly avoided recession in Q4 and speculation that it might avoid the Trump administration’s new tariffs. That respite proved short-lived.
Add to this the potential fallout from the endgame in the Russia-Ukraine conflict, the wild fluctuations in energy prices and even the Brexit aftermath, and it adds up to a profound, if unpredictable, impact on credit spreads and corporate profitability. This is especially true of the eurozone and sterling and euro-denominated bonds.
Steady hands in shifting markets
In today’s volatile market environment, participants in the sterling and euro markets are increasingly focused on minimizing risks, whilst also trying to express views and access liquidity. While no single strategy guarantees stability or performance, a carefully calibrated blend of insight led analytics, product expertise and liquidity provision can help clients manage risks and generate returns.
“Our insights led approach can help clients navigate complex markets,” says Kofi Oteng, RBC Capital Markets’ Head of Flow Rate Sales, EMEA.
Despite growing concerns over trade wars and protectionism, Oteng emphasizes that market upheaval is nothing new. He points to RBC’s track record as a trusted sterling partner during previous crises, including the 2009 Global Financial Crisis and the COVID-19 pandemic. “The current backdrop may be different, but our content-led approach remains reassuringly consistent and effective. Our clients recognize this and typically rank us among the top firms across our core markets.”
Francesca Lynch, Head of Investment Grade Cash, Europe, echoes Oteng’s perspective from a credit trading standpoint.
“At RBC, our robust infrastructure, global footprint, and strong balance sheet enable us to provide liquidity and transparent pricing, even in the most complex and unpredictable market conditions,” Lynch explains. “That global reach and speed of execution have been critical in earning the trust and deep relationships our clients rely on.”
“Our insights led approach can help clients navigate complex markets.”
Kofi Oteng, Head of Flow Rate Sales, EMEA
Navigating complexity with tailored strategies
For all sterling and euro market participants – from institutional investors to corporate treasurers – managing currency, inflation and interest rate fluctuations of increasing magnitudes is a growing problem, but it also creates opportunities.
“Hedging against these risks has to be done by matching strategies to each client’s unique circumstances,” says Oteng. “There is no one-size-fits-all approach. Understanding the idiosyncratic needs of our clients enables us to offer tailored solutions and deliver positive client outcomes.
That same trinity of risk factors is front and centre for Lynch as she applies IG Credit Trading solutions to protect Sterling and Euro investors’ credit portfolios.
She stresses the importance of harnessing deep insights to help clients make informed, strategic decisions in a complex economic environment.
“A shifting market requires precision – generic credit solutions won’t cut it. Our clients are not one size fits all. They may, for instance, have exposure to specific sectors like energy or industrials that are impacted by particular issues, such as supply chain disruptions or energy price volatility. They may also have multi-currency exposure across many markets which needs its own hedging strategy.
“We use a range of solutions to optimise credit management, often across multiple markets. The common denominator is that they all effectively mitigate risk for the client and minimise their credit exposure.”
“We use a range of credit strategies to effectively contain risk and minimise client credit exposures.”
Francesca Lynch, Head of Investment Grade Cash, Europe
“Integrity and trust are at the heart of how we do business,” Lynch says. “Clients value our discretion, strong credit rating, and the expertise of our credit strategists, who help them navigate uncertainty—particularly with single-name credits.”
Building stability in an uncertain market
“At times like these, the ability to tap into deep pools of liquidity across multiple markets will be vital in ensuring reliable execution,” notes Oteng. The strength of RBC’s balance sheet and long-standing reputation as a trusted partner in times of market stress has ensured that we’re consistently viewed as a trusted partner for our clients.
“When you put that together with the proven track record of our global rates franchise, you get a unique proposition that I believe gives us a competitive edge over many UK-centric players,” Oteng adds.
Providing consistent liquidity—especially during periods of market stress—is at the core of RBC’s client-first approach. “Clients know they can rely on us to be there for them, whatever the market backdrop,” say Lynch. “In times of more challenging liquidity, that commitment becomes even more critical, reinforcing the trust our clients place in us.”
“Our genuinely global coverage means we can provide our clients with insights and liquidity across markets, further enhancing our competitive edge in IG credit trading,” she explains.
What’s ahead for sterling and euro markets?
Trade tensions, energy challenges, and geopolitical uncertainty continue to shape the economic landscape. Rising global inflation is adding pressure on central banks as they weigh interest rate adjustments against the need to support economic growth and manage debt levels.
All of this will have significant impact on the sterling and euro markets throughout 2025. “The quest for liquidity, stability and insightful solutions will be a major trend among investors, one that RBC can support,” says Oteng. At the same time, as in any volatile market, RBC can provide the insight-led value that not only manages risk but exploits potential opportunities.
Lynch acknowledges that 2025 presents a challenging terrain for sterling and euro markets, with inflation being a particular influence on credit spreads and bond yields, especially in the eurozone.
"The ongoing volatility in energy prices, and the implications of tariffs and interest rate moves will be key factors affecting credit pricing in the coming year. ESG has been a massive driver in credit markets over the past few years, and we’re committed to working closely with our clients to navigate the current evolving landscape,” she concludes.
