Big data week ahead for the UK

Hi everyone,

GBP-EUR briefly hit a new one-year best on Friday as the positive support of Sterling continues. Surprisingly though, the Pound hasn't capitalized on the weekends record vaccinations which many analysts had predicted. Still, Sterling waits to pounce as the UK economy starts to slowly open up once again and continues to offer favourable rates. 

The Pounds uptrend has slowed of late due to the bond market play, central bank speeches and profit taking, but still sits at a 1-year high versus the Euro and near 3-year high against the US Dollar. Many believe the recent 'plateau' is merely a speed bump that should be overcome in the weeks ahead and we agree. Virus and vaccination trends have obviously been the biggest market movers for over a year now and with the EU & UK on completely different paths, we see no reason £-€ rates cannot get to 1.20 by the summer.

Onto the EU & UK relationship now and it's another week, another argument. Last week the EU went ahead with its formal lawsuit over the UK's extension to the Northern Irish border goods checks. This week we will find out whether the EU will decide to ban vaccine exports to the UK. EU leaders are meeting on Thursday to discuss the current state of affairs with the Oxford/AstraZeneca vaccine, as supposedly the company is supplying the UK and not the EU currently. The company has denied the allegation many times over and it highlights yet more problems within the EU that no-one is taking responsibility for when things go wrong. 

It's an important calendar week for the UK & £, as investors look for more evidence the UK economy is re-emerging. Tomorrow we have employment data for December with another bruising round of job losses expected. Of course this data has been and will continue to be not of huge importance because of the furlough scheme keeping down the real numbers of unemployment. However, there is a chance of market volatility depending on the numbers.

On Wednesday, we have inflation data that is key for the market just now and then the latest PMI figures. The higher inflation goes, the sooner interest rates will change so this data release is important to £ each month and PMI for March should show good expansive numbers. Friday's retail sales number shouldn't be a game changer, but Thursday's EU council meeting and BoE Governor Bailey's participation in a virtual panel discussion will be.

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