Hello all,
I hope this message finds you well. Firstly, I’d like to extend my sincere apologies for my absence over the past couple of weeks. I’ve been on paternity leave, cherishing precious moments with my newborn. However, I’m thrilled to announce that I’m now back in the office, brimming with excitement and ready to dive back into market analysis.
Fortunately, Sterling has maintained its strength during my absence, with GBPEUR trading at 1.17 and GBPUSD at 1.27. The Pound has quietly emerged as one of the strongest currencies this year, and I foresee its resilience persisting for the foreseeable future.
As we embark on another week, let’s delve into the data and events that lie ahead:
- Monday: We anticipate the release of European inflation data, expected to come in lower at 3.1%, nearing the 2% target. This could potentially weaken the Euro, signaling the likelihood of future interest rate cuts. However, any unexpected upward deviation could bolster the Euro’s position, though such an outcome seems improbable.
- Tuesday: Eyes turn to the Bank of Japan (BOJ) and Royal Bank of Australia (RBA) interest rate decisions. Market expectations lean towards the BOJ raising rates to 0% for the first time in a while, which would be warmly received by investors. Such a move could strengthen the Japanese Yen, reflecting increased confidence in the economy. Similarly, a rate hike by the RBA could bolster the Australian Dollar. Later in the day, we await EU ZEW data, projected to weaken slightly, and U.S building permits data, forecasted to strengthen the Dollar marginally.
- Wednesday: UK inflation data takes the spotlight, with a projected drop in core inflation to 4.6% and 3.6% inclusive of all components. Lower inflation increases the likelihood of interest rate cuts in the UK, potentially exerting slight pressure on the Pound. As such, caution is advised for Pound traders. Additionally, the Federal Reserve’s interest rate decision is due later in the day, with no cuts expected this week. However, Fed Chair Powell’s commentary on the U.S economy and rate cut expectations will be closely monitored.
- Thursday: A busy day unfolds with Flash PMIs from Europe, the UK, and the U.S. As per convention, PMI readings above 50 are perceived positively, while those below may weaken the respective currencies. The highlight of Thursday will be the Bank of England’s interest rate decision. While no cuts are expected this month, attention will be paid to the voting pattern among members and any forward guidance provided. However, a UK interest rate cut still appears to be several months away.
- Friday: The week concludes with UK retail sales data, anticipated to be weak. Given the adverse weather conditions last month, this outcome seems probable. Weak retail sales typically indicate reduced consumer spending, which can dampen economic growth prospects and, consequently, weaken the Pound. However, any positive surprises could potentially buoy the Pound.
As always, if you have any questions or require further clarification, please do not hesitate to reach out.