The Euros are over and we are now back to life without football- Sterling exchange rates had a strong push-up through the week with GBPEUR closing the week at 1.19 and GBPUSD closing the week above 1.29- which gives us a very nice springboard into a potentially volatile week. The reason for this Sterling strength is that it seems that the BoE will keep rates higher for longer- potentially until September, and even when a cut does happen, the chances of more aggressive cuts are slim- I would say this Is a positive for the economy and this is reflecting in the exchange rates.
Looking at economic data for the week, on Tuesday we begin with- EUR ZEW economic sentiment index, which we are expecting to come in weaker than previous which will most probably weaken the Euro a little, later in the day we have US retail sales which we are also expecting weaker at 0%, this may potentially weaken the Dollar so we could see a higher GBPEUR and GBPUSD on Tuesday.
On Wednesday we start the day with UK CPI data where we are expecting inflation to drop by 0.1%, which will be another month with lower inflation- this will strengthen the case for a BoE rate cut but as know the Banks stance on how much they will cut, I am not expecting this to weaken off the Pound. This will then be followed by EUR inflation data where we are expecting Core inflation to remain the same at 2.9% so we are not expecting any ripple effects on the Euro.
Thursday will be a pretty volatile day, beginning the day with UK unemployment data which is expected to drop to 5.7%, which is positive for the Pound, this will then be followed by the ECB interest rate decision, we are not expecting any further cuts this month from the ECB, however a shock cut could drop the Euro slightly- however this seems very unlikely this week.
Lastly, on Friday we have UK retail sales, which we are expecting higher due to the better weather over the last month, this should have reflected in spending for the UK public. Overall I am expecting a good week for Sterling exchange rates.