By Ashley Finill
Last week proved turbulent for Sterling as political uncertainty and UK data releases dictated its movement. The pound had initially started the week strongly as it hit close to 5 month highs on the Euro, which presented a great buying opportunity for those looking to buy Euros. Sterling also made steady gains on the US Dollar by around a cent. However, halfway through the week saw Sterling’s gains reversed, slipping nearly over a cent on the Euro and a sharp drop by nearly 2 cents on the US Dollar. There were a couple of key factors, firstly due to the Peter Mandleson scandal with tipping off emails sent to Jefferey Epstein whilst in government office. This drew unwanted pressure on UK Prime Minister Kier Starmer as he confessed during PMQ’s on Wednesday afternoon that he knew about Mandelson’s long-term relationship with Epstein before appointing him US ambassador, saying that he had “lied repeatedly” about the extent of his contact with Epstein. The saga ultimately could cost Kier Starmer his job. Lastly, Sterling sharply dropped off on Thursday afternoon after the Bank of England interest rate decision. They held as expected but all members were not in favour as a vote of 5-4 for a hold was announced and much closer than expected. UK inflation is expected out next week on the 18th of Feb, should the figure be lower than expected then the BoE may look to cut interest rates at the next meeting on the 19th of March.
Sterling Under Pressure as UK Political Uncertainty Deepens
As we enter the new week, sterling remains under pressure, continuing from where it left off at Friday’s close. Political uncertainty surrounding Keir Starmer has intensified following the sudden departure of senior aide Morgan McSweeney, widely regarded as the prime minister’s “right-hand man”, fuelling speculation over Starmer’s position and once again undermining investor confidence in the already fragile Pound. Sterling reacted swiftly, losing around half a cent against the euro as markets priced in the growing risk to government stability. With questions mounting over Starmer’s authority, even from within his own party and rumours of a potential leadership challenge, the market appears to be factoring in the possibility of the prime minister stepping aside. As seen during the Conservatives frequent leadership changes in recent years, such uncertainty tends to weigh heavily on sterling, which lost ground against the major currencies during those volatile periods, a risk the pound now appears to be facing once again.
Data this week
Monday
9.30am – EU – Sentix Investor Confidence
ECB Speeches – Lane, Nagel and President Lagarde
Fed Speeches – Waller, Miran, Bostic
BoE Speeches – Mann
Tuesday
12pm – UK – BRC Like for like retail sales
1.15/30pm – US – ADP Employment – Employment Cost Index – Retail Sales
Fed Speeches – Hammack & Logan
Wednesday
1.30pm – US – Average hourly earnings, Labor Force Participation rate, Non-Farm Pay rolls & Unemployment rate
7pm – US – Monthly budget statement
ECB Speeches Cipollone & Schnabel
Fed Speeches – Schmid, Bowman & Hammack
Thursday
7am – UK – GDP
1.30pm – US – Initial jobless claims
3pm – US – Existing homes sales Change
ECB Speeches – Cipollone, Lane & Nagel
Friday
10am – EU – Employment change & GDP
1.30pm – US – CPI