By Matthew Vassallo
The Pound has managed to gain a modest foothold against both the Euro & US Dollar over recent weeks, moving away from the lows it reached earlier in the year against its two major counterparts. Sterling received a boost last week following a more dovish hike by the Federal Reserve than the markets anticipated, which helped solidify the Pound’s earlier weeks’ gains against the greenback.
Sterling’s cause has also been helped by a slightly more bullish economic outlook. Bank of England governor Andrew Bailey echoed the thoughts of UK Chancellor Jeremy Hunt, with both individuals now claiming that the UK economy was likely to avoid going into an official recession. Whilst this optimism certainly seems to have increased investors’ risk appetite and helped to stabilise, even to some extent boosting Sterling’s value, it is of course relative to their far more dovish outlook previously.
Despite this welcomed improvement for those holding Sterling, the underlying concerns which have plagued the market since the turn of the year remain. Whilst inflation levels have started to tick down, they remain at alarmingly high levels historically and with the BoE having already embarked on an aggressive strategy of raising interest rates at every juncture for over a year, there are serious question as to the effectiveness of this on-going strategy. The high levels of inflation are continuing to drive consumer prices up, which has resulted in the current and unstainable cost of living crisis gripping the UK economy at present.
Looking ahead and it’s a very quiet for the UK, with little economic data of note being released. As such, it is likely there will be more emphasis than usual on S&P UK Manufacturing indicator, released later this morning. The same entity then releases its Services data for the UK on Wednesday, followed by their indications for UK Construction output on Thursday.
Elsewhere, those with GBP/EUR requirements will be keeping a close eye on Eurozone inflation data released tomorrow, with US Manufacturing & Jobless data released later this week, also ones to keep an eye on.