The pound drifted sharply against the euro over the course of Friday, ending around 0.3% down on the week overall, after hitting a nine-week high on Wednesday following better than expected GDP data. This morning we’ve seen a slight recovery against both EUR and USD.
Undoubtedly, data from the UK has the power to move the market sharply day to day, just as broader global trends, wars and panics can move it over the longer term. Which makes this week especially interesting and potentially worrying.
Tomorrow at 7am we’ll hear UK unemployment data. This comes from the Office for National Statistics (ONS) and along with it comes average earnings, which last month rose, including bonuses, by 6.8%. The market expects that to move up to 7.8%, with unemployment remaining steady at 3.8%. With the risk of on one hand a wage-price spiral and on the other a summer of strikes if wages are held down, this is crucial data. What a time to be an economist (or to be exposed to a large currency risk, for that matter).
On Wednesday it’s the turn of inflation and on Thusday the European Central Bank exchange rate decision. On Friday there’s a real bonanza, with three high-level sets of data being released: Gfk Consumer Confidence, retail sales for June and PMI.
On top of all that there is the Conservative leadership contest, with another candidate being knocked out in successive votes today, Tuesday and Wednesday. That will leave just two candidates and there is a risk of sterling weakening severely if investors see the final two candidates as less trustworthy on the economy. There is also, now, the suggestion from Rishi Sunak that he would deregulate the City of London.
It might happen before Wednesday should a candidate pull out, but if you have a major purchase abroad, the early part of the week looks like the day to lock in your rate with a call to your trader on 020 8108 5163.
We’ll be keeping cool in our air-conditioned office, with all our traders manning the phones. Do call them to discuss your plans and take control.
