By Ashley Finill
As month end approaches and with the majority of February’s data now released, there is little for traders to go off from fresh economic data, which could heavily influence market movements. Despite the lighter data, the market is still volatile and this week has seen Sterling on a bit of a rollercoaster. On Monday, the Pound extended last week’s losses, continuing to weaken against both the Euro and US Dollar. This could potentially be some ‘pricing-in’ taking place with next month’s Bank of England interest rate decision on the horizon. With unemployment in the UK increasing and inflation easing slightly, investors appear increasingly cautious on Sterling with the risk of an interest rate cut now a distinct possibility. Rate cut expectations are building, particularly after the last BoE meeting delivered a narrow vote of 5-4 to hold rates. The close split suggests the next meeting could be a pivotal moment for the Pound should they decide to cut rates in March. Tuesday overall was a better day for Sterling as in the afternoon we saw a spike of just under half a cent against the Euro. However, at the time of writing this morning, those gains have already begun to fade, which highlights how fragile Sterling currently is.
UK By Election Could Upset Sterling
Tomorrow, a by-election will be held in Gorton and Denton, where voters are choosing a new MP after Andrew Gwynne stood down in January. The seat has traditionally been a safe Labour stronghold. However, bookmakers currently make the Green Party the favourites, with Reform polling in second place. If Labour were to lose a seat like this, it could further weaken confidence in the party and increase pressure on Prime Minister Keir Starmer. Political uncertainty will almost always weaken a currency, as investors move away from riskier positions, which does not bode well for the Pound.
Data Today
Today, as mentioned, there a very few releases of data to go off. This morning Germany posted GDP, which came in as expected at 0.3%, the same as the last quarter. As there were no surprises there, it’s likely the reason Sterling has tailed off from the Euro in the early morning trading. At 10am the Eurozone post the core harmonized index of consumer prices, which is expected to contract from last month’s figure of 2.3% to 2.2%. In the afternoon there are speeches from Fed members, Barkin, Schmid and Musalem.
Manchester Show Weekend
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