I am sure that many of you have already noticed the Pound’s decline over the past couple of weeks ever since BoE Governor, Mark Carney signaled that an interest rate hike may not happen in May in the UK. We have seen the GBPEUR rate fall to as low as 1.13, and GBPUSD rate fall to as low as 1.35- with scope for these rates to weaken further! The reason the Pound was strong through the first quarter was due to the fact that UK economic data was coming in strong and many believed the BoE would put up interest rates following these releases- unfortunately, economic data has started to come out weaker and it now doesn’t seem logical for the Central Bank to do anything with interest rates- (Although some do believe an interest rate cut could be on the cards).
For this reason, this could be a very volatile week for the Pound- on Tuesday morning we are expecting strong industrial production figures out of Germany, and due to the fact that the German economy accounts for about 40% of the Eurozone as a whole, this could be enough to strengthen the Euro and drive the GBPEUR price down a little further. The GBPEUR rate is at 1.1315 at time of writing and the next support zone is at 1.1284, which could be the next level we see unless there is something substantial to strengthen the Pound.
Without a doubt, the most important day this week will be Thursday, to begin with, the UK will release Manufacturing and Industrial production data, both of which are expected in stronger than last month- this will come out alongside trade balance data which is expected wider than last month- which is probably due to the higher Sterling exchange rates we saw in April. I don’t expect much reaction to the data as the markets will be waiting for the BoE rate decision later on Thursday to place any trades- no rate change is expected, however the BoE could always surprise the markets (wouldn’t be wise, but could still happen) but the most likely situation is rates stay where they are- Mark Carney will speak following the decision and hopefully give some clarity as to how the economy is doing and when any movement on rates is expected.
If you have a transaction to make this week and would like to know how best to strategise around Thursday- please don’t hesitate to contact me.08