The week finished with a bang yesterday following the alleged computer-generated sell-off within the Asian markets, the Pound is yet to recover from some of its losses during the early hours of Friday morning.
Quiet week for Sterling
Next week is a quiet week for the Pound with much of the movements to come from further Brexit news. We witnessed last week how European leaders and their stance towards Brexit impact exchange rates, and given that the UK looks likely to adopt a hard Brexit, further clues as to how the UK plans its exit from the EU could impact Sterling.
In any event, the Pound sell-off is likely to continue and further evidence that the EU is holding ground in the wake of Brexit could push GBPEUR exchange rates to new record lows. July 2011 was the last time exchange rates were in these ranges and with Article 50 yet to be scheduled and negotiations to take shape, its looking more likely that the UBS prediction of parity will materialise.
Economic data for the Eurozone
German exports on Monday are expected to show gains from the previous Month. But with the Pound’s recent fall in value coupled with new Brexit uncertainty, German exports to the UK could leave a dent in Monday’s release. The ZEW survey on Tuesday which highlights business conditions in Germany, could also present a downfall from the Brexit vote.
Much of next week’s data for the Eurozone falls on how Germany is performing, but in any event I am not expecting any release to benefit Sterling unless something catastrophic comes into play.
Economic data for the US
With much of the attention shifting towards the US elections, GBPUSD exchange rates could see a slight uplift next week, and could remain volatile up until the presidential elections.
It’s a heavy week for US data we approach the latter part of next week. The FOMC minutes on Wednesday could provide further clues to how well the US economy is performing and therefore, provide clues as to when the FED plan to raise interest rates. Markets will be watching this update with scrutiny however odds of a hike in December remain about 50%.
Initial jobless claims on Thursday could spell some trouble given yesterday’s increase in unemployment for the US. Friday’s retail sales could spell further bad news for the economy, The last 3 consecutive releases have shown consumer spending is falling which could be related to the upcoming US elections. This follows the consumer confidence survey by Reuters which could confirm that consumer confidence and thus spending, is on a decline.
This could have implications for a potential FED hike in December, and economic data over the coming weeks will play an important part in Yellen’s decision.
UK sentiment will likely be the main driver behind GBPEUR and GBPUSD exchange rates next week, and even in the absence of positive data for the Eurozone and US, Sterling will likely continue its downward trend.