Sterling Struggles With Key Resistance Level

By Simon Eastman

The last week saw good news for those with sterling to exchange, as the pound benefited from some strength. The main reasons were the lack of further restrictions from the Government, coupled with talk that the Bank of England may be considering another interest rate increase when it meets next month.

Despite significant daily new cases of Covid being reported and NHS hospitals reporting they are feeling the pressure immensely, the Government are adamant the current restrictions are enough to see the country through this current wave of the pandemic, which has seen the markets look favourably on the pound. While our EU neighbours are in different levels of lockdown the pound has been taking advantage but given the significant level of daily numbers it seems the pound has maxed out its benefit as we have seen it struggle to break above key resistance ceilings across its major competitors, especially the single currency euro.

Given the Covid situation, and the pricing in of an interest rise already in place, those with a currency exchange to make, might like to consider taking advantage of these current levels, which are at some of the best in two years. We know only too well from the past how the rates can change as the economic and Covid situations can change on a knife edge, and the interest rate rise is by no means a foregone conclusion. Although the economic factors have been less of a concern in moving markets during the pandemic, we have a few to note this week including US data which may give further clues as to when the Fed might start to tighten current monetary policy, a move which would upset the current favourable levels on cable.

Monday – EU unemployment

Tuesday – AUD retail sales, UK like for like retail sales

Wednesday – EU industrial production, US inflation figures

Thursday – US jobless claims and producer price index

Friday – UK GDP, industrial and manufacturing production, trade balance, US retail sales and Michigan consumer sentiment index.

As we can see, it’s very US-data heavy, so for anyone with a currency requirement, make sure to stay in touch with your consultant as the week goes on. The US data won’t just affect GBP/USD but also GBP/EUR and the euro and the dollar often move against each other when it comes to sentiment-led trading. Throw Omicron into the mix and we could be in for an eventful week, so for some friendly guidance as the week unfolds, contact one of the team today.