By Matthew Boyle
This week is particularly busy for data with Eurozone inflation on Tuesday, the US Federal reserve interest rate decision on Wednesday followed by the Bank of England Interest rate decision on Thursday.
The Pound has found itself under pressure in recent weeks as markets have scaled back expectations for further rate hikes. Last week saw the European Central bank hold EUR interest rates at 4%, and whilst this allowed the Pound to claw back around half a cent against the single currency in the latter part of the week, GBP/EUR rates remain close to a 7-month low. EUR inflation data on Tuesday will be closely watched by investors given its link to interest rates and will provide a key indicator as to the ECB’s ongoing stance.
Whilst the US Fed are not expected to raise rates on Wednesday and hold at 5.5%, the monetary policy statement is critical to market rates. Wars in Ukraine and Israel have pushed strength to the Dollar given its high liquidity and resulting safe-haven currency status and USD strength is expected to continue whilst conflict and global market uncertainty remain. Fed policy has been bullish to date with this tone is likely to remain, which puts pressure on other central banks to keep pace. Should however the statement confer a more reserved tone this might help benefit Pound buying rates.
Thursday is the key day for the Pound this week and again whilst rates are expected to be held at the current level of 5.25% the statement is key to GBP rates as markets and investors consider if the door is still open for more hikes in early 2024 or if in fact rate cuts should start to be priced in long-term.
With GBP rates sat at the bottom of a well-established range it does seem a concerning time for Pound exchange rates. Whilst there is a strong floor of support for the Pound currently protecting it, GBP/EUR data releases this week have the potential to see the Pound plummet if all are against its favour. Should you have an upcoming currency requirement speak to your consultant today to help avoid and remove unnecessary risk of adverse market movement and resulting increased potential cost.
Data This Week
10.00 EUR Business Climate, Consumer confidence and Economic sentiment data
13.00 EUR German Inflation Data
19.30 CAD BoC’s Governor Macklem speech
01.00 CNY PMI data
N/A JPY BoJ Interest rate decision and monetary policy statement
07.00 EUR German Retail Sales
10.00 EUR Inflation data
21.45 NZD Employment data
01.45 CNY Manufacturing data
12.15 USD Employment change
14.00 USD Manufacturing PMI
18.00 USD Fed Interest rate decision and monetary policy statement
00.30 AUD Trade balance data
12.00 GBP Bank of England report, MPC vote and Interest rate decision
12.30 GBP BoE Governor Bailey speech
12.30 USD Nonfarm payrolls and earnings data
12.30 CAD Unemployment data
14.00 USD ISM Sercvices