Sterling starts the week trading slightly lower against the euro than on Friday but still remains up on this time last week.
This bout of euro strength has largely been driven by the French presidential elections, which saw current president Emmanuel Macron secure a strong lead in the first round of voting. If he wins the second round, happening in two weeks’ time, he will be the first French president to be re-elected in 20 years – but he’ll have to beat rival Marine Le Pen to do so.
A Le Pen win could send the euro lower, albeit maybe not as much now she is no longer seeking ‘Frexit’, so markets will be watching the upcoming polls closely.
We could see further euro movement on Thursday when the European Central Bank (ECB) will reveal its latest interest rate decision. Markets were taken by surprise when minutes from the ECB’s recent meeting suggested that interest rates may be hiked sooner than expected, so any confirmation of this could boost the single currency.
Looking to the week ahead, other key data releases to look out for are US and UK inflation, German economic sentiment and Michigan consumer sentiment. All could spell volatility for the pound.
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