Important releases this week may show fresh promise for the struggling Pound. After the Bank of England’s hesitance to raise interest rates, this week’s data could bring a new tool to the arsenal. The table below shows the market movements for a number of GBP currency pairings during the last week:
|Currency Pair||% Change||Difference on £200,000|
The inflation data due at 9:30 on Wednesday will be the pivotal release with all eyes looking for an indication that prices are moving in a direction to encourage further interest rate rises at the Bank of England. In recent weeks we have seen the Pound tread on the heels of the Bank of England interest rate expectations.
Whilst the Bank of England have expressed a sometimes bullish attitude to later interest rate rises, they will of course been keenly watching the data before acting.
The core CPI release will therefore be critical as the Bank of England often uses the number as a marker underlying wage growth. This is due to the core CPI excluding seasonally volatile products such as energy and food, especially important thanks to the Beast from the East. With a forecast of 2.3% a strong read here would show a positive outlook for the Pound.
I expect the retail sales figures released on Thursday will also be watched keenly amid growing concerns regarding consumer spending. With the previous release at -1.2% further drops would indicate a bearish trend.
The settling of the customs union for the time being has bought some respite from uncertainty for the Pound. However, without an increase in positive trends in data it is hard to see an interest rate hike in the proximate future. Whist previous weeks showed optimism it is becoming increasingly clear that the data has not followed this consensus. Without a distinctively more positive outlook it is likely the Pound will continue to struggle for the short term.
With the Pound currently sitting at relatively good rates, there are strong arguments to consider as possible white waters lie ahead. It may be wise for Pound sellers to trade ahead of further turmoil in the coming week.
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