The Pound has been on a downward trend ever since the last BoE rate decision, but surprisingly enough, much of the impact has been on GBPUSD exchange rates as opposed to the GBPEUR rate. The reason for this is that there are still some political and economic issues in Europe such as Italian & Greek debt which need to be resolved and reevaluated- which are currently keeping GBPEUR above the 1.14 area. As you can see on the chart below- the highest we have seen this year is 1.1588 as an exchange rate, and we seem to bounce between the 1.13 area back up to the 1.15 area frequently, as long as economic data allows- which is why reaching 1.15 again isn’t something I see as impossible.
This week there are a number of data releases which could indeed help the Pound if they come out better than last month- the first will be on Wednesday when the Eurozone release manufacturing and services data, expecting to show a contraction in manufacturing numbers- as the Eurozone is an exporting nation, this could help the GBPEUR rise slightly higher on Wednesday morning- this will be shortly followed by UK inflation which is expected to come in slightly higher than last month- which is a positive for the market as higher inflation means the BoE will hike interest rates in 2018. If this number comes in lower for whatever reason then I would expect the Pound to weaken across the board.
On Thursday, the UK will release retail sales figures which are expected a lot stronger than last month’s- mainly because the weather was better in the UK- though this is expected, the Pound may strengthen slightly following this release if it is indeed stronger than last month’s- if Wednesday and Thursday go well we could see the GBPEUR at 1.15. (Please be aware if we do manage to reach 1.15- I do think the high will be short-lived as it always is- so please contact me if you would like to make use of market orders or forward contracts if we see these rates.)
Friday is also a very important day for the UK as GDP figures will be released- with our last numbers showing we are only growing at 0.1% QoQ currently, a 0.2% contraction would now put is in recession territory, I do hope that the change in weather positively impacts GDP and we see no change or even a higher figure this month, which could keep the Pound higher, any change lower would send Sterling straight back down.
As always, if you have any questions or would like analysis on a particular currency pair please don’t hesitate to contact me directly.