Sterling exchange rates had a pretty rough week with GBPEUR falling from 1.19 down to 1.1750 and GBPUSD dropping as low as 1.1770 through the week. The primary reason for these moves was the surge in the U.S Dollar continuing through the week amidst concerns about rising gas prices.
At the end of the week we did see stock prices rise after a strong retail sales number from the U.S- which has effectively shortened the chances of a 100bps rate hike from the U,S this month, and it seems 75 bps is now back on the cards.
Looking at data this week, we do have a number of important releases on the cards which could well move the market – the first being the UK employment change on Tuesday- which is forecasted to come out slightly lower than last month at 170k. This would not be surprising as the jobs market has been pretty hot recently in the UK and a cool-off period is expected, the Unemployment rate is expected to stay unchanged at 3.8%. On Tuesday we also have Core European inflation data expected to come out at 3.7% (Note, core inflation is always lower than CPI) as it excludes energy and food.
On Wednesday we have Core Inflation to come out for the UK, similar to the above, we are expecting a slightly lower of 5.8%. however this is not a true representation of inflation in the UK, but it is interesting to note that even without energy and food, inflation is still above 5%.
On Thursday, the ECB is finally expected to raise interest rates by 25bps to 0.25%, and raise the deposit facility rate to -0.25% (Note this is still negative). For the last few weeks markets were pricing in a 50bps hike, but with the amount of debt currently in Western Europe, a 50bps hike would make this debt a lot more expensive overnight and could potentially cause more issues.
The UK is still in the process of picking it’s next PM, and with debates underway, it seems the bookie’s favorite is now Penny Mordaunt- but with 5 candidates in the race, it’s not worth speculating until it has been narrowed down to 2 candidates.
As always, if you have any queries surrounding a future currency transfer please don’t hesitate to get in touch.