The pound strengthened by half a cent against the euro and by over a cent against the US dollar last week, bolstered by June’s unexpectedly robust GDP report. A subdued Friday saw some of the week’s risk appetite fade away.
If Friday was quiet, it was because all eyes were trained west towards Alaska, where a visit with Donald Trump allowed Vladimir Putin to end his years in the diplomatic icebox. Few were surprised when the meeting yielded no immediate peace or ceasefire. However, the US president will today meet with Volodymyr Zelenskyy and other European leaders amid reports that Russia has set its price for a ceasefire at a land swap in the Donbas – one of Ukraine and Europe’s negotiating red lines.
It’s hard to exaggerate the significance these discussions hold for currency markets. After years of military disruption, peace (however fragile) would inject serious momentum into the excitable landscape. Should negotiations fail, markets may interpret this as a sign that even greater ruptures are on the way.
Diplomacy is therefore very much on the menu this week, but there are still plenty of economic factors that could sway exchange rates. The UK reports inflation data on Wednesday with the headline number expected to nudge closer to 4%, undermining the Bank of England’s recent interest rate cut.
Two more crucial reads serve as the chaser. On Thursday, the pound will look to sector data from S&P Global to find a direction, before Friday brings sales data from the retail trade in July.
Things are mostly quiet for the eurozone save for the latest German manufacturing data, which comes courtesy of the Hamburg Commercial Bank (HCOB) on Thursday.
Before heading off to their idyllic retreat at Jackson Hole, the Federal Reserve will publish minutes from its policymaking committee on Wednesday evening. A light week for the United States in terms of macroeconomics means the US dollar will likely be in thrall to central bankers and the White House.
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