The pound remained buoyant on Tuesday but struggled to find meaningful gains on the back of some mixed employment figures.
Ahead of the release of the UK’s inflation data, GBP/EUR was trading in the region of €1.1726, GBP/USD was holding $1.2927, GBP/AUD had recovered slightly to AU$1.7411, GBP/NZD was lingering around NZ$1.8748 and GBP/CAD was on the cusp of C$1.7610.
How could UK inflation boost the pound? Keep scrolling to find out…
What’s been happening?
The week had a bit of a gloomy beginning for the pound, with the currency largely consolidating or extending previous losses.
The only UK-related news to focus on was a report from EY ITEM Club, which predicted that the rate of domestic unemployment could surge from 4.7% to 5.4% in 2018.
While the pound struggled, the Canadian dollar was able to bounce higher thanks to an increase in oil prices.
With both Russia and Saudi Arabia backing plans to extend the current production cut, crude prices climbed and CAD exchange rates were taken along for the ride.
Overnight the Reserve Bank of Australia (RBA) published the minutes from its latest policy meeting. The minutes had minimal impact on the Australian dollar as they largely reiterated comments issued at the time of the central bank’s gathering, with concerns about the Australian housing and labour markets being particularly highlighted.
What’s coming up?
The UK inflation report will be the day’s biggest pound-mover, with accelerating inflation having the potential to send Sterling higher.
Although the Bank of England (BoE) has intimated that it will ignore climbing consumer price pressures for the time being, if inflation surges by more than policymakers have anticipated they could be forced to rethink their current stance on interest rates.
Other news to be on the lookout for today includes the German and Eurozone ZEW surveys and Eurozone GDP.
The German ZEW surveys of the current situation and economic sentiment are both expected to show improvement – results which could give the euro a boost.
Similarly, if Eurozone Q1 growth figures meet or exceed expectations for expansion of 0.5% on the quarter and 1.7% on the year, the GBP/EUR exchange rate could add to yesterday’s losses.
Meanwhile, US housing and manufacturing production figures will have an impact on how the pound performs against the US dollar. Below-forecast results would have a slightly negative effect on predictions for a June rate hike from the Federal Reserve and could push GBP/USD higher.
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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)