The pound was stable to end last week but sterling will have to run the gauntlet of UK economic releases this time around.
GBP/EUR continues to trend towards its highest level in over a year. Aside from some day-to-day fluctuations, sterling moved only modestly against its major rivals over the course of last week and EUR/USD also treaded water in an unusually quiet session.
That could change soon, however. As always, economic data represents a chance for jumpy markets to overreact, and UK inflation is sure to cause a few bumps, whichever way the number moves. Markets are currently expecting January’s number to land in the 4.1%-4.2% range, which would mark the second straight month with a slight increase.
The US dollar could come under pressure in this scenario, particularly if its own set of inflation figures falls as expected. Jerome Powell was recently handed a gift-wrapped excuse for higher rates with red hot jobs data, but calls for a change in policy will surely grow in the event of lower inflation.
The joker in the pack is the eurozone’s economy, where inflation is running at around 3% and economic growth has fallen back. Recent euro weakness has centred around the assumption that the European Central Bank (ECB) will look to lower interest in the near future.
Economic releases come thick and fast this week. You can never be sure of anything in currency markets, so our advice is to take risk management seriously. After all, it may make a huge difference to how much you pay for your next international transaction.
Here’s what to look out for this week…
Monday is a day of speeches. We’ll see Andrew Bailey take the lectern, along with policymakers from the ECB and the Federal Reserve.
UK unemployment then follows on a busy Tuesday along with the German ZEW Economic survey and US inflation.
The crucial UK inflation read for January is set for Wednesday, followed up by UK GDP and US retail sales on Thursday.
Friday sees the UK presenting its own retail sales for January, before the US chimes in with PPI and the preliminary number for the Michigan Economic survey in the afternoon.
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