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Decisive week ahead for FX volatility

Plenty of key releases due out this week making it a very tricky few days to navigate..

The Pound versus Euro endured its biggest weekly decline last week since mid-December. -0.30% is not anything to brag about though and highlights both the complete lack of volatility currently, as-well-as traders viewing Sterling positively. 

This week could be tough on GBP if sentiment turns negative, which is what some data-houses are suggesting. The first major challenge comes Wednesday with the UK Spring Budget. It would be amiss to let our readers know that IF in the eyes of investors, Chancellor Jeremy Hunt gets the budget wrong, Sterling would lose around 2% of its value (similar to Truss/Kwarteng Sep 22). 

We don't believe there is a case for this mainly because an election this year is likely to be called and so Government will want to offer something positive in the eyes of the people. So we could actually see a small bump in value come Wednesday for GBP.

Still, this is a risk event to all Sterling sellers and with other key releases elsewhere this week, it's a decisive week for the Pound. 

Thursday sees the latest ECB interest rate decision and more important press conference. As always, the market will be waiting to hear the stance of the ECB in terms of when they can expect to cut interest rates. Nothing is expected to change here, but you never know with central banks!

On Friday, Euro-Zone GDP is a talking point. Anything negative will see the Euro fall and anything positive will see it gain slightly. 0% growth is expected and whilst this has a chance of being a non-event, it's still a crucial release to watch out for.

Fed Chair Powell is kept busy this week with a couple of testimony's in-front of congress on the topic of interest rates. Such events can quickly create volatility if traders/investors hear some new insight. The main release from the US comes in the form of jobs numbers on Friday. 

On a side note, a firm named Apollo Global Management has made headlines today by being the first to announce that they do not expect to see the Fed cut interest rates this year. They see inflation rising slightly this year, which will mean the USD is extremely undervalued if so and will leave GBP overvalued.