Sterling exchange rates ended lower against the Euro and Dollar on Friday after a few days of strength against most G10 currencies. The reason for the initial strength last week was the Bank Of England indicating that the chances of negative interest rates were now lower than anticipated in 2020- which is positive for Sterling.

The reason for Sterling’s weakness on Friday was not as much to do with GBP as some may think, Global markets were down on Friday as investors concerns grew on whether the latest aid package would make it through Congress- some suggest the weakness in the Pound was due to travel corridors being closed by UK government, but in my opinion this is sensible and in the long run helps the Pound into recovery.

Given the way markets closed on Friday, Sterling could open the week a little softer if China’s GDP figures come out weaker than expected on Sunday evening (And the opposite if the data comes out positive)- this will most probably set the tone for the day. It is MLK Day on Monday so U.S Markets will be closed, so much of the heavy lifting will be done in the European session.

Looking at this week as a whole- it is easy to see that recent lockdowns, and talks of new strains of Covid are now spooking the market, and we may now be in a phase where the market starts to dip off (Globally). Sterling is usually a risk trade which reflects global sentiment, so when we see a global dip (March 2020)- Sterling goes with it- and when confidence is back up, so is Sterling. Aside from any data, it is key to keep a close eye on Covid Cases, the Brazil strain, Hospital numbers, Deaths (I know these are all depressing things to watch- but unfortunately this is what the market is moving on).

On Wednesday, the UK will be releasing inflation data (For December)- so with that, we usually expect a higher number due to the amount of shopping that incurs (Even if it was all online)- this may provide a short term lift for GBP. On Thursday the ECB interest rate decision will be the highlight, and we will be specifically watching for any news that remains Dovish, and anything specific to the Euro as a currency (Against the Dollar mostly).

President Joe Biden will be inaugurated on Wednesday 20th January, and I am sure will be going straight to work on his vaccination programme and new Stimulus package, and speaking of vaccines, currently, the UK’s vaccine numbers are the best in Europe and are really providing a ray of hope to many of us – it does look like the UK Government will hit their targets which is fantastic news, but there will be no review on current Lockdown restrictions until February realistically. The Government is stating that all over 18’s will have been offered the vaccine by the end of June, which is fantastic news, and so far it does look like we are on track for that, so credit where it is due.

It will be another volatile week (Weeks are nothing but volatile these days)- so if you have a particular situation you would like guidance on please don’t hesitate to contact me.