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The UK is set for a busy week of economic data.
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.
Make sure any upcoming transactions are protected against the risks of sudden market movements. Secure a fixed exchange rate now with a forward contract; call your account manager on 020 3918 7255 to get started.
GBP: Inflated expectations
The pound trended slightly upwards against the euro while remaining little changed against the US dollar last week.
UK inflation figures due on Wednesday could burst the balloon of anyone hoping the Bank of England will lower interest rates. Most outlets in the know are forecasting the headline figure to nudge up, although that is expected to be reversed over the first half of this year.
GBP/USD: the past year
EUR: Over to EU
German inflation fell to 3.1% year-on-year in January, after a brief resurgence in December. It will be the eurozone as a whole in the spotlight this week with the release of Q4 GDP statistics and another chance to read the temperature of the German economy with the ZEW survey.
GBP/EUR: the past year
USD: While we’re talking about memories…
Joe Biden came in for criticism from the Department of Justice last week for his alleged diminished memory. Whether that’s true of not, the President and his aides will hope the American electorate will recall the performance of the economy at the ballot box. This week marks more influential US data, and for Biden, the chance to potentially shake off recent accusations by pointing to genuinely impressive progress since taking office.
USD/EUR: the past year
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