Last week, UK PM, Theresa May suffered another defeat in the House of Commons- Brexit is still the main driver for the Pound at the moment and as March 29th keeps getting closer and closer- it seems the volatility is not going to slow down. Though negotiating tactics don’t seem like they will change from the Governments perspective, it seems that the deal that the PM has proposed will not really be changing. There are now talks about a final amendment that could be voted in essentially passing the PM’s deal, and then putting that deal to a referendum- this will essentially end up extending Article 50 and extend the volatility for the Pound until a decision is made.
The outlook for the Euro currently is interesting- Germany narrowly escaped a technical recession last week, showing no growth at all at 0%. With Germany making up 40% of the Eurozone’s economy, if they were to fall into recession (Which is still possible this year) then we will see the Euro weaken in a big way, if the UK has somehow sorted everything out by then, we could see GBPEUR rise a lot over the next 12 months as there are looming problems in Italy and France as well.
This week there are some data releases that will be of interest-
- UK Average weekly earnings on Tuesday 9:30am- Expected strong
- UK Employment change on Tuesday 9:30am- Expected strong
- FOMC Minutes- Wednesday 7pm- Volatile for USD
- Eurozone Manufacturing & Services- Thursday 9am- Expected strong for EUR
- Germany GDP- Friday 7am- No change expected
- Eurozone CPI (Inflation)- Friday 10am- No change expected.
All in all, another week of volatility is expected on exchange rates, GBPEUR is still at desirable levels for now around 1.13-1.14 which is still a strong buy, GBPUSD has been slowly falling to the 1.27-1.28 area as the Dollar has grown in strength- this is something to be taken advantage of as later this year we are expecting GBPUSD exchange rates to rebound.