Key UK data week ahead
It was an extremely volatile environment for Sterling to be trading in last week and that's unlikely to change for this week with key UK data looming. The Pound moved nearly 3% across the board last week, the same swing usually seen over a one month period. In monetary terms, as an example, that's a €3,300 difference on a £100,000 exchange between the high and low point within the week.
The main positive news for GBP was the change in stance from the BoE, who confirmed a more hawkish reactionary tone for future interest rates (a key driver in determining the value of a currency). This was just what the doctor ordered, as the past couple of weeks have shown a very bleak future for the Pound. The news was also in-line with what economists had been predicting pre-May on what the BoE would do this year to curb inflation.
However, this week could ground GBP once again. Firstly, a new headwind faces the UK with a summer of work strikes set to begin. Railway unions are demanding a 7% wage increase and will disrupt UK travel this week whilst creating a knock-on effect to the economy. There are reports suggesting teachers, airport staff and public sector workers could be following suit.
Then we have economic data which has proved negative for the Pound of late. Q2 & Q3 were always going to be tough for the UK to navigate anyway due to the cost of living crisis. The market will want to see as close to forecast as possible for Sterling to not get covered in pessimism and create a sell-off. Inflation is expected to steady, PMI's should show economic growth has slowed to a crawl and both retail sales and consumer confidence are due to be poor. Any surprise in the data will prove positive, but that looks unlikely at this stage.