Sterling closed the day above 1.14 against the Euro following a jump at the end of last week. This was pleasing to see as the Manufacturing Purchasing Managers Index data came out considerably worse than expected. Whilst the data is based on manager’s opinions of the next few months, it can provide an indication of optimism or concern. The data over the last few months has been particularly good despite Brexit concerns, however it could look as though that might be coming to an end.
Inflation Data Tomorrow
The latest inflation report will be released tomorrow at 11am which is set to be volatile for Sterling. There has been considerable increases in the levels of inflation over the last few months which will eventually have consequences. The Bank of England are mandated to keep inflation between 2-3% and it currently resides at 2.9%. If there was to be further increase which looks very probable, then there could be calls for an interest rate hike. With that in mind there could be a major boost for Sterling, a hike could bring as much as a 4 cent gain in the build-up to the decision.
Mark Carney and GDP on Friday
Bank of England Governor Mark Carney will speak at the end of the week and in my opinion this could take the GBP/EUR above 1.15 for the first time in a month. Carney having last week spoken about reducing the fiscal stimulus and raising rates, could provide further clarity on his thoughts. This does of course bring a risk of him once again talking them down, but I think that’s unlikely this time. On Friday there will also be GDP figures released which could like the PMI data today provide a shock result. There is thought to have been a reduction in consumer spending in the last few months and this could how this week.