After quite an eventful week on the markets with GBPEUR reaching 1.14 and then retreating back to 1.1320 by Friday’s close and GBPUSD hitting above 1.21 before settling at 1.20- we have a pretty data-packed week ahead which should present opportunities for those of you who are looking at trades in the near future.
The reason for the recent softness in Sterling mainly came from the lack of strength in global equities and with the Pound being a high beta currency, a risk-off environment usually leads to a weaker Pound very quickly, which is exactly what we have seen. It is also predicted that the Bank of England will slow down on their rate hikes moving forward and potentially finish this month, which is now making the Pound less attractive for foreign investment which is also leading to a weaker Pound- if investors can get more interest in other currencies then that is where we will see the money flow into.
From a forecasting perspective, the outlook is now not fantastic for the Pound, and I cannot see much reason for much further strength for this year if the BoE were to slow down/stop their rate hikes- especially with the ECB ramping up theirs at the same time. There is still a lot of data we need to see, inflation will undoubtedly rise again this year and we have not seen any real movement in the jobs market just yet- but we are seeing evidence of shrinkflation in consumer goods (Receiving less for the same or more money)
In regards to data this week- please see below for the main releases-
- RBA Interest rate decision
- Eurozone GDP
- Bank of Canada interest rate decision
- Powell testimony on Wednesday
- Jobless claims in the U.S
- UK GDP, Trade balance and industrial and manufacturing production data
- U.S NFP’s
I am still out of the office until Friday- but if you require any quotes or any guidance please don’t hesitate to call the dealing desk on 01322 319 550.