The pound fell sharply yesterday after the UK inflation rate jumped from 7% to 9% – its highest level since 1982.
Turning to the pound this morning, Sterling is mostly rangebound, with GBP/EUR flat at €1.1768 and GBP/USD muted at $1.2883. GBP/CAD and GBP/NZD are subdued at C$1.7123 and NZ$2.0106 respectively, while GBP/AUD retreats to AU$1.9235.
Looking to the week ahead, the most pressing release will be the UK’s latest GDP figures. Will stagnating growth weigh on GBP exchange rates?
What’s been happening?
The US dollar was the star of the show at the end of last week, striking its best levels since the start of the year on the back of the latest US payroll report.
US payrolls came in at 225,000 in January, up from 147,000 in December and blowing past expectations for a modest rise of just 160,000.
On top of this, the accompanying earning’s figures revealed a sharper-than-expected acceleration in US wage growth last month, further buoying the appeal of the ‘Greenback’.
The pound made some fleeting gains on Friday, firming through most of the day before falling sharply at the end of the European session after US vice-president Mike Pence warned a UK-US trade deal could be at risk due to Boris Johnson’s decision to involve Huawei in the role out of the UK’s 5G network.
Meanwhile, the euro drifted lower at the end of last week’s session in response to Germany’s latest industrial production figures after they revealed factory output plummeted to a decade low in December.
What’s coming up?
Top of the agenda this week will be the publication of the UK’s latest GDP figures.
Outside of a significant pick-up in growth in December it’s highly likely the Office of National Statistics (ONS) will report that UK growth stalled in the last quarter of 2019.
As such we expect to see the pound trend lower through the first half of this week’s session.
Meanwhile, EUR investors will be paying close attention to the Eurozone’s latest industrial production figures amid concerns the slowdown in Germany could have spread throughout the bloc.
Finally, in the absence of any notable US economic data through the first half of the week, US dollar movement is likely to be driven by market risk sentiment, extending the safe-haven currency’s gains if markets remain gripped by coronavirus fears.
Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure
Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)