Huge data week for the UK/£

£-€ rate hits an incredibly surprising 6-month high..


Wow, what a start to a notoriously horrible month for the Pound. 1% was made across the board last week and I have to say it came completely out of nowhere. With no major data due last time out, the temporary role of playing a 'safe-haven' currency has paid dividends and £ sellers should seriously consider acting upon the recent gains. 

This week, we have 3 huge data releases with the UK providing 2 of them. GDP is expected to remain unchanged, but any surprises will move the £ (no doubt the MSM will be hot on this in a negative way). Before that, we have the main market driver in an interest rate decision.

25bp is the consensus, but many are suggesting the BoE may leave rates as they are. We are in the camp of the former and suggest 5% will eventually be the call before policy changes after the summer months. This is because the data is clear; red-hot, persisting inflation remains, as-well-as strong labour and economic data.

We think (rather unbelievably) there is more to come from the Pound this week. Hedging your bets therefore looks to be the prime outcome in our opinion..

A strong run from the Euro was meant to start last week, however the ECB single-handedly denied the single currency of that. A 25bp hike and a following dovish tone, did more harm than good. Whilst more hikes are still expected, the aggressive pursuit has ended and so it leaves the EUR in almost a limbo-state. 

This week sees pretty much no data whatsoever from the bloc and so the € will be moved by events elsewhere..

The Dollar remains under pressure, even though the Fed went for the more hawkish decision of raising interest rates by 25bp rather than keeping them unchanged. What the Fed does next will be determined (not solely) by tomorrow's huge inflation outcome.

Inflation is forecast to remain unchanged tomorrow, but any surprise to the downside will weaken the USD further. The market is gearing up for US interest rate cuts by year-end, but there is still so much time to go that this isn't being reflected in the US value currently.

The £-$ is trading at a 1-year high and so is extremely favourable right now, but have one-eye on the remainder of the year as more gains are likely to be made..