The Pound is hovering close to an 11 month high against the Euro after an excellent rally on Friday saw rates surge higher for the pair. Sterling rallied against all of the major currencies including the Australian and New Zealand dollars whilst rates for GBP/USD also saw a good jump higher.
Politics will be a big driver for Sterling exchange rates this week as the missile strike lead by the US, Britain and France will continue to be debated after the event. Theresa May is facing criticism from members of opposition parties including the SNP and Labour parties. This is likely to be the main theme this week and any political uncertainty stemming from these developments could see volatility for the Pound.
Economic data for the week ahead
UK economic data this week will largely focus on UK unemployment data released tomorrow morning at 09:30. The Bank of England will be paying close attention to the numbers as although unemployment has been falling which is good for the British economy the level of wage growth has been sluggish.
Impact on Bank of England interest rate decision
Any indication that wage growth is finally picking up would be welcome news for the central bank and could help cement the likelihood of an interest rate increase next month in May. For the moment the markets are largely expecting that rate increase to happen and the risk for the Pound will be if the numbers disappoint. Any back tracking from the Bank of England due to weaker economic data could see the Pound come under new pressure.
The question for the Bank of England will be how to manage the weaker economic data due to the cold weather from the beast from the East. The last two weeks saw a drop in the construction and services sector which has so far been shrugged off by the markets. There are fears that Gross Domestic Product (GDP) for the first quarter of 2018 may have fallen and this could be damaging for the economy and hence the Pound.