A Busy Week Ahead for the Pound

By Matthew Vassallo

Sterling exchange rates have stabilised over recent days, following a flurry of key economic data releases last week.

Whilst failing to make any significant gains against either the EUR or USD following its upturn earlier this month, those holding GBP position will be slightly more optimistic than they perhaps were at the turn of the year.

Much of the market’s focus remains centred around the current high inflation levels within the UK, although with the BoE indicating that they expect these levels to fall back towards the 2% target level by April, investors risk appetite for the Pound has increased as a result. Whether this prediction is a tad optimistic considering the current state of affairs is up for debate, although today’s speech by BoE governor Andrew Bailey could shed some more light on things and give us a greater insight into the UK central bank’s current though process.

Tomorrow is likely to be a key day for investors with the release of the latest UK unemployment data. With the official unemployment rate predicted to fall from 4.2% to 4% for January, any deviation from these figures is likely to cause additional volatility within the markets and could have an immediate impact on Sterling’s value.

Looking across the pond and the US finds itself once again mired in controversy. Former President and the current frontrunner for the Republican nominee Donald Trump outdid even himself following comments he made over the weekend. He claimed he would ‘encourage’ Russia to attack any NATO allies who were not “paying their dues”, comments which immediately rebuked and condemned by the White House. With the November US presidential elections now coming into focus, some might say it is unfathomable that a previous president could be leading the polls after such inflammatory comments, although this could be as much down to the lack of support for current president Joe Biden as anything.

US inflation data tomorrow is predicted to show a mixed bag, although Wednesday could hold the most weight with investors as the latest batch of UK inflation data and Eurozone GDP figures are released. Both have historically had a significant impact on GBP/EUR exchange rates. Thursday is another key day with UK GDP data being released, so expect a busy week on the markets.