By Matthew Boyle
It is a busy week ahead for the Pound. Today sees Andy Burnham take position as Prime Minister of the UK government. Whilst FX markets usually react negatively to political instability and uncertainty, in recent weeks the news of Burnham taking the top job has helped see GBP gain ground – noticeably against the single currency (EUR), with it sitting currently around 13-month highs. However, commentators and market analysts note that whilst Burnham may offer better prospects on paper than his predecessor Starmer, he is yet to set out any clear plans for his upcoming term as leader. Later today though he intends to set out a 10-year plan for Britain. So, while to date markets have reacted positively to Burnham taking the reins, don’t be shocked if we see GBP rates wobble, should the proclaimed King of the North send things south.
Whilst politics will dominate the TV screens in the UK today, the bigger driver of exchange rates currently, and one that will show their hand this week is inflation. With the US-Iran conflict flaring again energy prices will rise. In turn rising energy prices will spike inflation levels. Only a few months ago inflation stagnated and in fact fell, and the Bank of England stated they would not raise interest rates this year. However, with the Iran conflict reignited, with it comes rising oil prices and energy costs. This will drive inflation higher and as a result could lead the BoE to shift their policy stance, potentially to hike rates later this year. This increasing likelihood has seen GBP>EUR rates push near to a 13-mpnth high – offering a great opportunity to those looking to secure Euros.
With UK inflation date released Wednesday, and the European Central Bank Interest rate decision on Thursday, no doubt we are in for a turbulent week ahead. Friday sees the 3 majors go head-to-head with Manufacturing and services PMI data. However, make no mistake… Burnham and market data aside, what will drive FX rates in the short term will be central bank policy toward interest rates, driven by inflation. And so ultimately at present, what occurs in the Middle East and how Trump plays out the Iran conflict, matters.
Should you have a transfer to make you may want to advantage of the current levels we are seeing for the Pound. Speak to your currency consultant today for some friendly guidance to help make your money go further.
Monday
07.00 EUR German Producer Price Index data
13.30 CAD Inflation data
23.45 NZD Inflation data
Tuesday
07.00 GBP Employment data
09.00 EUR ECB Bank lending survey
13.15 USD ADP employment data
Wednesday
07.00 GBP UK Inflation data & Producer Price Index
Thursday
13.15 EUR ECB Monetary Policy Statement
13.45 EUR ECB Press Conference
Friday
07.00 GBP Retail Sales data
08.30 EUR German Manufacturing and Services PMI data
09.00 EUR Eurozone Manufacturing and Services PMI data
09.30 GBP UK Manufacturing and Services PMI data
14.45 USD US Manufacturing and Services PMI data