The euro slumped on Thursday following the European Central Bank’s (ECB) latest interest rate decision.
This underpinned the Pound throughout the week, although economic concerns capped gains.
The latest data from the Confederation of British Industry (CBI) revealed more signs that business activity is slowing. Meanwhile, fears about the economic impacts of Brexit and ongoing industrial action also pressured GBP.
On Friday, Sterling pared its gains after consumer credit data far exceeded expectations. The latest report suggests that UK households are having to take on more debt to meet the rising cost of living.
So far this week, Sterling is climbing against many of its peers as an upbeat mood in European markets boosts the risk-sensitive currency.
The BoE decision on Thursday is the focus this week. The consensus is that policymakers will opt for a 25-bp rate rise, but a larger hike is possible. Investors will also be attentive to the bank’s forward guidance – if it hints at further rate increases, GBP may climb.
Before then we have the final services PMI on Wednesday. A confirmed slowdown may dent the pound.