Last week was challenging for Sterling, with disappointing data culminating in weak retail sales figures. This pushed GBPEUR to 1.18 and GBPUSD to 1.21. Just two months ago, GBPEUR was trading above 1.20 and GBPUSD above 1.30, underscoring how quickly market dynamics can shift. Unfortunately, Sterling’s start to the year has been less than ideal, largely driven by the significant strength of the U.S. Dollar since the U.S. election. With President Trump’s inauguration on Monday, markets are closely monitoring potential developments as he resumes his presidency.
Key Market Events This Week
Monday:
- U.S. markets will be closed for Martin Luther King Jr. Day, limiting activity from across the Atlantic. There is no high-priority data scheduled in the UK or Europe, so a relatively quiet day is expected. However, any executive orders issued by President Trump on his first day could be noteworthy. While immediate market impacts are unlikely, this is a factor to watch from Tuesday onward.
Tuesday:
- The primary focus will be on UK employment data, including jobless claims and average earnings. The unemployment rate is expected to rise to 4.4%, while average earnings (excluding bonuses) are forecast to increase to 5.5%. This presents a mixed picture: while wages are improving, the employment situation is deteriorating. Unless we see a positive surprise, this release is likely to exert further pressure on Sterling.
Wednesday and Thursday:
- Midweek is expected to be relatively quiet, with few high-impact data releases. Markets will likely focus on sentiment and any developments from the U.S. or other major economies.
Friday:
- The week’s most significant events kick off with the Bank of Japan’s (BoJ) rate decision. A 25bps hike is widely anticipated, and unless there is an unexpected shift in policy—potentially influenced by the early days of President Trump’s term—volatility is likely to be muted.
- Flash PMI data will follow from Europe, the UK, and the U.S. Expectations suggest that European and UK economies remain stagnant. This could further weigh on market sentiment, particularly for Sterling.
Final Thoughts
This week promises to be volatile, with Sterling under continued pressure. Key data releases and geopolitical developments will be pivotal in shaping market movements. If you need guidance on upcoming transactions or currency strategies, don’t hesitate to reach out for assistance