The Pound is likely to see a volatile week with the release of UK unemployment data released on Wednesday. The figures are particularly important as they include the average earnings figures something the Bank of England is keeping a very close eye on, which is helping to form monetary policy.
Any increase in wage growth is likely to prove beneficial for the Pound. The Bank of England held interest rates at the last meeting but the tone was considerably more hawkish with the markets now expecting the next interest rate increase to take place in May or August. However this is all very much dependent on the progress of Brexit and how successful the negotiations are.
Anything positive in the data is likely to help support the Pound although gains are likely to be limited in this period of Brexit uncertainty.
Theresa May speaks in Germany
UK Prime Minister Theresa May spoke on Saturday in Germany although there was little market reaction. Another speech is expected in the coming weeks which may offer considerable volatility especially if received well both at home and in the EU.
GDP figures exected later this week
UK Gross Domestic Product figures are released on Thursday and cover the final quarter of 2017. There has been much positive news with regards growth in the global economy and the positive impact this will have on the UK export markets. It may be too early to see this reflected in the official data this week but any improvement should give the Pound a boost.
Political uncertainty still a concern for the Euro
As far as the Euro is concerned the political uncertainty in both Germany and Italy are likely to keep the pressure on the single currency. The Social Democrat Party will be voting on whether to formally set up a repeat of the grand coalition with Angela Merkel’s party. If no coalition is agreed then this could see the Euro weaken in the short term especially as Angela Merkel may have to form a minority government.
The Italian elections are always one to watch and if there is no clear government at the beginning of March after these elections then there is likely to be more pressure on Euro exchange rates.