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After weakening slightly on Friday, the pound is trading around the same levels against the euro and the dollar this morning. It’s a light week for economic data in the UK, however, PMI figures are due later today, which will indicate how the UK economy has performed in January.
The Prime Minister has an important week ahead, as civil servant Sue Gray is expected to publish her report looking into the allegations of lockdown parties at Downing Street. Six Conservative MPs have, so far, publicly stated ‘no confidence’ in the Prime Minister.
The markets will be turning their attention to the Federal Reserve’s interest rate decision this week, which is due to take place on Wednesday. It is thought that officials will pave the way for a rate hike in March.
Tensions in Ukraine continue, with the UK withdrawing some embassy staff. Russia still denies any plans for military action. Over the weekend, Deputy Prime Minister, Dominic Raab, said that it was “unlikely” that British troops would be sent to Ukraine.
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GBP: PMI data for January to be released today
The pound hit key resistance levels last Thursday and weakened slightly on Friday. Following a strong performance last week, sterling is trading around the same levels as Friday this morning.
Both December’s inflation data and a ‘hawkish’ speech from Governor of the Bank of England, Andrew Bailey, caused the pound to strengthen significantly, before weakening on Friday.
Expectations for a rate hike from the Bank of England could continue to support the pound. However, PMI figures for the UK will be released this morning, which will show how the economy has performed in January so far. The figures are expected to show a slight increase from December, largely due to the decrease of the Omicron variant.
GBP/USD chart over past year
EUR: PMI and GDP figures this week
The euro is slightly weaker against the dollar this morning, after making some gains at the end of last week.
PMI figures will be released for the eurozone later today, which will give an indication of how the eurozone economy has performed in January so far. Germany’s PMI figures were published this morning, beating expectations in both the manufacturing and service industries. This could be due to the reopening of Germany’s economy following the prevalence of the Omicron variant.
On Friday, GDP figures will be released for Germany as well as economic sentiment figures for the eurozone.
USD: Dollar stronger ahead of Fed interest rate decision
The dollar is slightly stronger against the euro and a basket of currencies this morning. This is due to anticipation for the Federal Reserve’s interest rate decision, which will take place on Wednesday, as well as rising tensions in Ukraine.
As a ‘safe haven’ currency, the dollar tends to strengthen during times of crisis, which is why it has been helped this morning by the situation in Ukraine. The US has ordered relatives of embassy staff to leave Ukraine and has warned people not to travel there amid rising tensions. However, Russia still denies that it has plans for military action.
There will be a series of data releases for the US this week, however the event to watch out for will be the Federal Reserve’s interest rate decision on Wednesday. This will be followed by a press conference with Fed Chair Jerome Powell.
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