The Pound had a great week last week after a number of supportive data releases in the UK including positive employment numbers, rising inflation, and an improvement in Retail spending. All three of these have now put the idea of an interest rate hike from the BoE back on the table with traders betting on a rate rise either next month or February of next year.

Following the supportive UK data, GBPEUR exchange rates were also pushed higher by the news of restrictions returning across a few countries in Europe following rising Covid cases. As of Monday, Austria will be in lockdown and it seems other countries including Germany are looking at tightening restrictions.

We have seen the Euro weaken in a big way, with the EURUSD price now sitting at 1.1280 at the time of writing, and charts suggesting we could test the 1.10 area. With the current situation in Europe it is highly unlikely we will see any ECB rate hikes anytime soon, so fading the Euro seems to be the trade to make.

I am watching the UK case numbers closely as so far we are not seeing much change to the numbers we have had over the last couple of months, which means for now Sterling should be supported as there is no restrictions expected in the UK at this point, it is something that is worth keeping an eye on in case there are changes over the next couple of weeks.

For the next week focus will be on the situation in Europe, any whispers from the BoE about December, and Dollar strength- unfortunately, the GBP strength is not translating into Cable and doesn’t look like this will change anytime soon.