Last week saw more volatility across all markets, mainly due to the Fed and the ongoing situation between Russia & Ukraine. We saw GBPEUR rise from 1.19-1.20 by Friday close, with GBPUSD a little more subdued closing at 1.3580 on Friday. The main reason for the rise in Sterling was traders continuing their bets on further rate hikes this year following wage pressures in last week’s data- inflation is rising and unfortunately, wages are not going up with it, so interest rate hikes are the BoE’s best bet at bringing down inflation before further problems are caused.
Another reason for the rise in GBPEUR was further clarification from ECB President, Christine Lagarde, who has stated that the ECB will take a “gradual” approach to raise interest rates- the complete opposite to comments made a couple of weeks ago, these dovish comments were enough for Traders to focus their attention back on GBP as opposed to the Euro.
This week, I feel the tensions between Russia & Ukraine will be the main focus for the market, with the current situation, the market is pretty risk-off until there is confirmation that the situation has been resolved- which is making conditions rather unfavorable until that point. The U.S and U.K seem to be heavily involved with headlines coming from both the President and the PM- we are also finding these headlines are market moving and are changing directions of the markets within seconds.
On Monday we have PMI data out for the UK, and we are mostly expecting strong numbers (Above 50) with a slightly higher number for UK services PMI, which could kick off the week in a strong way for GBP sellers. Aside from that, it will be a relatively quiet week as far as economic data is concerned, and I expect markets to be headline-driven.