It was a week of ups and downs for sterling last time out, with economic data the key driver of the moves. Is inflation back for good or would November’s increase prove to be small potatoes? For many, the answer was the latter, although its hard to be sure when risks to the energy supply chain – a key driver of price increases – remain so pronounced.
GBP/USD lost around 0.5% over the course of the week, but the pound did regain some value after the initial shock of Wednesday’s data had subsided. The euro rebounded as expectations of early rate cuts were quashed. EUR/USD still lost three thirds of a per cent week-on-week.
Disappointing UK retail sales gave ever-fickle markets a chance to get over their inflation-induced strop. Sterling gained on Friday after it was announced retail sales fell by 3.2% in December as consumers staggered their spending over the Christmas period.
It seems we’ve been waiting for an age for the American economy to show signs of weakness. Yet even though the Federal Reserve sits tight on its 5.25% lending levels, initial jobless claims are down and economic activity is up.
This morning, US presidential hopeful Ron DeSantis announced he had pulled out of the race for the Republican nomination. His endorsement of Donald Trump all but clears the way for his main rival to win the race.
Here’s what to look out for this week…
Things start relatively slowly, with only a handful of impactful reads to begin proceedings. UK public borrowing statistics are available on Tuesday, when the Bank of Japan will also make their interest rate decision.
Wednesday brings manufacturing and services PMI in the EU and the UK but little else to get excited about.
The hardest hitting events all come in the second half of the week, however. The European Central Bank (ECB) is expected to leave interest rates unchanged at 4.5% on Thursday, which is the same day we’ll get Q4 GDP growth and durable goods figures from the US.
The UK and German editions of the Gfk consumer index then round the week out on Friday along with US personal income and spending.
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