March and the first quarter as a whole were very supportive for Sterling exchange rates, given the fact that we are now in an economic environment where the UK has officially fallen into a recession and that we are now talking about interest rate cuts, it has been a welcome surprise to see GBPEUR still trading at the 1.17 level and GBPUSD still above 1.25. Generally the outlook is still positive for GBP leading up to interest rate cuts, and then that will be the point to reassess depending on how the markets are looking.
Looking at this week, we only have a 4 day week due to the bank holiday, we don’t have many releases on Tuesday, just PMI data for Europe and mortgage approvals data for the UK, both expected slightly stronger than previously released, however, I am not expecting this to be a volatile day, it is the first trading day of April so we may just see a lot of repositioning in the market after sell-offs last Thursday.
On Wednesday we have Europe core inflation data, where we are expecting inflation to fall again to 3%, which is now getting very close to the ECB’s 2% target, this will be welcome news to the markets and we will now be looking at the ECB for forward guidance on when their rate cut cycle will begin. Later on Wednesday we have U.S ADP employment change which is usually a strong indicator on the U.S job market, ISM Servces PMI and a speech from Fed Chair Jerome Powell, so Wednesday will definitely be a volatile day for the US Dollar and specifically the EURUSD price.
On Thursday we have UK services PMI which is expected lower than previous, which could be a reason for weakness on the Pound, this is released alongside the same data for Europe, but aside from this, it will be a relatively quiet day.
Friday is set to be a volatile day with U.S non farm payrolls releasing where we are expecting a lower release at 200k, this is of course, not a given as NFP’s are notoriously known to not come out as expected, I personally feel we might see a higher release, but if you are trading USD, Friday is a day you want to ensure you have ample protection in place in case of volatile moves.