By Tom Arnold
The last couple of weeks has been a bit of a rollercoaster for the Pound, with political upheaval here in the UK putting significant pressure on the UK government and by association on Sterling. Deputy Prime Minister Angela Rayner, was forced to resign after her failure to correctly pay stamp duty was revealed, and the subsequent reshuffle of the cabinet was surprisingly extensive. There is also now an election process within the Labour ranks to find her long-term replacement. Top this off, with extensive demonstrations, largely from the right wing of the political spectrum, most recently over the weekend in London, where over 100,000 people turned out in support of far right activist Tommy Robinson, and you have a melting pot of political uncertainty that makes it hard for investors to consider the Pound a ‘safe bet’.
On a slightly more positive note for Sterling, UK growth, while poor at 0%, came in bang on expectations and was viewed as a good win for the economy, in what had been a troubling period, where a negative reading would have been no surprise. This has left the Pound slightly higher than might have been expected with the political backdrop and presents what is perhaps a good buying opportunity for those with Sterling in hand.
The week ahead is especially busy, with multiple key data releases. In the UK we have the unemployment rate on Tuesday, inflation on Wednesday, and retail sales on Friday. Europe gives us industrial production on Tuesday, inflation on Wednesday and multiple speeches from the ECB President Lagarde. In the US they have retail sales and industrial production on Tuesday, and jobless claims on Thursday. Most importantly though we have the key central bank interest rate decisions from both the UK on Thursday and the US on Wednesday.
Any of these releases could cause significant volatility on the market, with all of the major currency economies under scrutiny at present. The addition of the BoE and Federal Reserve monthly policy decisions makes this a huge week on the markets – interest rates are one of the biggest drivers of movement on the currency markets, with higher rates typically good for a currency as they attract yield-seeking investors. So keeping an eye on these announcements is critical – your currency consultant at A Place in the Sun Currency can help to explain the expectations of the market, and the options that exist to help manage the market risk inherent in volatile times.
Monday
European Trade Balance
ECB President Lagarde speech
Tuesday
UK Unemployment Rate
UK Average Earnings
European Industrial Production
European ZEW Economic Sentiment Survey
Canadian CPI Inflation
US Retail Sales
US Industrial Production
Wednesday
UK CPI & RPI Inflation
ECB President Lagarde speech
European CPI Inflation
Canadian Interest Rate Decision
US FED Interest Rate Decision
New Zealand GDP
Thursday
Australian Unemployment Rate
ECB President Lagarde speech
Bank of England Interest Rate Decision
US Initial Jobless Claims
UK GfK Consumer Confidence
Friday
UK Retail Sales
Canadian Retail Sales