Can Sterling Recovery Continue?

By Simon Eastman

Last week saw the pound make good ground across the board, with a 2 cent gain against the euro and a 2.5 cent gain against the US dollar by Friday.

The pound has been doing increasingly better against the dollar over the previous few weeks as markets see the Fed looking at smaller interest rate increases, following a run of more downbeat economic data releases than it had previously been touting. As fears of a US recession come back into play, the feeling is some lower rate hikes in the first quarter may be seen than had previously been expected, and we might not see any further hikes over the course of the year. US GDP  figures later this week will give a clearer indicator of market sentiment and most likely we will see some volatility surrounding cable too. Those with a USD requirement would be prudent to keep in close contact to see if the recent gains continue, or we see a snap back if the data changes market sentiment.

From the UK side, anyone with sterling has been  enjoying the recent run in form as mentioned with the recent gains. Unemployment, average earnings, the claimant count and inflation are all posting better than expected figures in the last week, adding to the pound’s buoyancy, whilst the Bank of England have still been talking about another interest rate hike possible next month. Since the general economic data has  been positive, we are seeing the more usual benefits to an interest rate hike (higher return for investors, therefore increased value of a currency as more investors buy in) with the pound increasing in value. With a mixed week ahead for the UK and EU data releases, alongside some strong US releases, we must be mindful that markets are paying much more attention to the economics than we may have seen through 2022, so a week of mixed data could lead to changes in the market sentiment and to how each currency performs.

The key release are outlined below:

Monday – EU consumer confidence survey. AUD composite, manufacturing and services S&P PMI releases overnight.

Tuesday – German GfK  consumer confidence survey. S&P UK, EU, German & US composite, manufacturing and services PMI data. New Zealand inflation overnight.

Wednesday – UK PPI input and output figures. German IFO business climate reports. Bank f Canada interest rate  decision, statement and monetary report. AUD inflation overnight.

Thursday – US durable goods orders, new home sales, personal consumption and GDP figures.

Friday – Core and personal PPI readings, personal income and expenditure, new home sales and Michigan consumer sentiment report.

Given the wide range of releases, from each of the major zones, plus we have Canadian and various antipodean releases also, any client with sterling in hand and an exchange to make in the coming days or weeks, should give one of the team a call today to discuss the available contracts and how each may benefit your specific requirement.