Sterling exchange rates fell through Thursday and Friday following weaker than expected economic data releases on Thursday. The pound has had a pretty good run over the last few weeks due to political speculation, however, it seems that the UK economy isn’t performing as well as some may think. At the same time, it seems that the European economy is going from strength to strength, German economic growth (which accounts for 40% of the Eurozone) was up by 0.2% on Friday, which also pushed the GBPEUR lower.
The question on everyone’s mind now is “Will the value of the pound rise?”- fortunately, on Tuesday we do have some UK economic data releases which so far are expected to come in strong - the most noteworthy being GBP Consumer Price Index (Inflation) - which is expected to show a rise of 0.3% on the yearly figure. As we all know, since Brexit, the pound has weakened by around 20% against currencies such as the US dollar, and as we import so much into the UK, many businesses have had to put their prices up, which has boosted inflation in the country. For now, the economy views rising inflation as a positive, until we get to 2%. Anything above that will mean we will need an interest rate hike, though inflation is going up, it seems wages are not following the trend.
On Tuesday we will also see the release of eurozone GDP figures, which is expected to stay the same as last time. However, due to the recent strength in the eurozone economy, I do not think it is unwarranted to make the guess that these figures could come out slightly stronger than the market is expecting, so please keep this in mind when converting sterling into euros this week.
On Wednesday we have another pretty busy day for those of you converting pounds, we will see jobs figures release in the UK. These figures include jobless claims, unemployment rate and average weekly earnings. Most of these figures are expected to come in the same as last time, apart from average weekly earnings which are surprisingly expected higher than last month- which could present some decent buying opportunities.
However, these opportunities may only last around half an hour, as we also will see the release of Eurozone inflation figures, which are expected a lot higher than last month on the yearly figure. So if you are looking to purchase Euros, it may be worth looking into financial tools such as limit orders and stop losses to take advantage properly and mitigate exposure.
The last data release this week for the UK that could move the markets is the retail sales figures that will be released on Thursday morning, as the weather has been good in the UK and there have been a few bank holidays, I am expecting a strong figure as UK consumers have been out more and buying more to drive the economy.