Sterling opened on Monday on a softer note with GBPEUR trading around 1.1750-1.18 and GBPUSD trading between 1.22-1.23. Fortunately, a higher close on Monday has given hope for a better Tuesday.
Sterling has a few risks surrounding it currently, one of which being UK-EU tensions over Northern Ireland, with PM Boris Johnson, expected to hold numerous meetings to begin introducing pieces of legislation to ease trade- the stance from the EU currently is that they are not currently willing to negotiate which is weakening the Pound as no solution to this brings us closer to a trade war between the UK & EU.
Aside from politics, we have a pretty busy week of data for the UK, starting with employment figures on Tuesday morning which is expected to be slightly weaker- with average earnings to stay on par- as long as we don’t get any shocks on this, I don’t expect this to be a market mover.
Wednesday is when things will begin to get interesting with UK core inflation expected to come out at 6.2% and inflation to come out at 9.1%- anything higher will most probably weaken Sterling, with 4 consecutive interest rate hikes, it is now showing that nothing the BoE is doing is helping rising inflation and that this is a problem that is here to stay for a while.
After Wednesday- Sterling’s biggest issue will be retail sales on Friday morning- last month this was the cause for a major slide in the Pound, and with a figure expected of -7.2% for April, we do not have high hopes this month either. If we see another negative number we could see the Pound fall again, with plenty of rain in April, rising energy and fuel costs- it would not be surprising that the British public spent a lot on clothes etc.
All in all-a busy week is expected, if you require any further information please let me know.