- GBP EUR exchange rates end the week how they started, highs of 1.11507 and lows of 1.09581
- GBP USD exchange rates have recovered from yesterday’s lows of 1.21090 but remain 2 cents down on week beginning. Further losses may come next week as US interest rate hike becomes more prominent
Sterling will remain under pressure next week as European leaders put pressure on tough Brexit negotiations. Next week is a busier week for Sterling, following a week of little economic data much of the movements were driven by political events, such as Theresa May’s stance towards Brexit and also her u-turn on Parliamentary scrutiny.
Sterling has recovered slightly from its week lows but I’m forecasting further falls next week.
GBP EUR – Brexit saga continues, ECB change in policy?
With the countdown to Brexit, Theresa May has 5 months to fulfill her promise of Article 50 and in light of Donald Tusk’s comments on Thursday, her options in terms of strategy are limited.
UK Consumer price figures on Tuesday have been upgraded but one must be cautious of increasing prices in the UK, which are likely to be a result of a weaker Pound.
On Thursday UK retails will be of interest to investors, given the big story around Marmite and growing concerns that suppliers will be increasing their prices, it’s likely consumers will bear the brunt of a weaker Pound. Weak retail sales could have implications for Pound Sterling next week.
The ECB interest rate shortly followed will be watched with scrutiny following rumours that the ECB will taper its QE programme next year. Any suggestions of this could be signs of an improving Eurozone in which inflation has been stagnant for some time. Monday’s consumer price release will give us some clues as to which way inflation is heading.
If you are buying Euros next week, look out for Brexit updates or political leaders throwing their weight at the subject. Be also wary of Government discussing the subject, we witnessed major volatility during Wednesday’s discussions.
GBP USD – Economic data and the case for a US interest rate hike
With Brexit the main concern for investors the US Dollar has benefited from its safe-haven status over the last few weeks. Considering how close we are to the US elections Sterling continues its downward trend with little safety net. With Donald Trump more unlikely than ever to win the US elections, investors appear confident in a Hillary Clinton victory, which arguably is a safer bet for the economy.
With just over 2 weeks until the next FED interest rate decision, US economic data is more important than ever. With markets already pricing in a FED change by December, Chairlady Janet Yellen and members of the FOMC will be looking for further confidence.
Tuesday’s US consumer price data – a strong measure of inflation will be one of the first keenly watched releases of the week, with the FED unlikely to consider a hike unless inflation can hold steady. Thursday’s jobless claims will be another key indicator of unemployment rates and following last week’s better than expected numbers, further falls in unemployment claims could increase the odds of a hike.
Whilst markets expect a Clinton victory in November, we must not forget the shock of the UK’s exit earlier this year. With 4 weeks until the results further video leaks of Trump or email leaks from Clinton could rattle markets significantly.
In any event, further losses for Sterling as a result of Brexit are likely and those buying foreign currency should consider buying sooner rather than later.