By Ashley Finill
As we enter a new trading week, sterling hopes for better start than the dismal time it had throughout trading last week, as the Pound slumped nearly 3 cents against the Euro and over 4 cents on the US Dollar. The underperforming UK economy is the main contributing factor to sterling’s misfortunes. It was reported last week that the UK is the worst performing economy within the G7 countries. This also includes Russia which is quite something if you consider the sanctions being implemented by countries across the world due to their invasion into Ukraine nearly a year ago, with war still raging between the two nations. To help curb inflation, the Bank of England has again raised the interest rates in the UK. Last week saw the tenth consecutive rise, to 4%, the highest it’s been in nearly 20 years. Historically rate increasing would be seen as positive giving sterling a boost, however the Bank of England stepping in so many times to recover the critical state of the economy has seen Sterling dwindling against the majors over the past couple of months, as the cost of living continues to grip the UK economy and with sterling feeling the brunt of it.
Pressure Increasing on PM over wages
Prime Minister Rishi Sunak faces increasing pressure this week with strikes continuing in the UK. Nursing’s director Patricia Marquis in a TV interview this morning said that so far there has been no direct contact with Rishi Sunak despite four previous strike days. Today sees tens of thousands of NHS workers including nurses in England, and ambulance workers in England and Wales taking action in a dispute over pay and conditions, this is the biggest walkout by NHS in history as the rise in inflation and the cost of living has sparked an outcry for better wages from unions. The Prime Minister remains defiant in his approach to tackling the UK’s crippling economy and on his reasoning behind not increasing wages. He said in a TV interview with Piers Morgan that money is being spent in various areas in NHS and claiming that new drops are being created with the money, but many criticise this claiming people in the job now should be paid more and the new roles not having an attractive salary. Rishi Sunak has also turned some heads within the party with his plans on migrants entering the UK or in this case not entering as he and Home Secretary Suella Braverman have drafted plans to ban channel migrants from appealing deportation, and pulling the UK out of the European Court of Human Rights, who themselves have said the new plans are unlawful. This could ruffle feathers within the Conservative party once again. Should there be further trouble on the horizon for the PM, the mounting pressure could be too much to bear for the unelected PM and could see a shift in trust amongst the Tory party, something that sterling could do without as uncertainty breeds negativity for the already fragile Pound.
Data Today and this week
This week there is a raft of data to be released which is likely to affect the currency market. Sterling has started off this morning on a better foot than Friday, this may be ahead of retail sales figures released in the EU at 10am being priced in as last months figure is expected to fall to -2.5%. If this figure is incorrect and better than expected, we may see a change in fortunes for sterling against the Euro this morning. To see out the day ECB’s President Lagarde speaks, this could be a market mover should there be mentions of their interest rate plans for this year. On Tuesday in the early hours, Australia is expected to raise their interest rate by 0.25%. In the afternoon, the Fed’s chair Jerome Powell speaks, they also could brief their plans on interest rate hikes in the US. Wednesday is a quiet day on the data front so over to Thursday as the European Commission releases economic growth forecasts at 10am, staying in the EU as Germany release harmonized index of consumer prices at 1pm. Later, on Thursday afternoon the US release initial jobless claims at 1.30pm. A busy end to the week, overnight in Australia the RBA monetary policy statement will be posted. At 7am, GDP is released in the UK which is expected to be an improved figure from -0.3% last month to 0%. On Friday afternoon unemployment in Canada is to be posted at 2pm. Finishing westside as the US release the Michigan Consumer Sentiment Index at 3pm.