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Market volatility set to continue with another huge week ahead

It's another tough week to call on the market with too many variables at play..



As expected, the Pound had a volatile week last time out which consisted of 3-days showing near 1% swings. The build up to, the release of and the aftermath of the BoE interest rate decision and meeting didn't disappoint. We expected to see the 50bp call, but was unsure how the market would react and by the looks of things, this still hasn't been interpreted as fully positive or negative as yet. 

Sterling managed to claim back the 1% it lost on Thursday last week versus the Euro after better than expected economic data and PMI's that outpaced the Euro-Zone's. There has been no such recovery against the USD, but the pair remains up 3% in the last month. 

Looking ahead, it's again one of those 'bitty' weeks where there is a lot of data releases with any one of them able to trigger a huge market response. On the UK side of things, a couple of BoE member speeches are followed by a GDP number release that could be anything. We therefore class the whole week as a risk event, especially as traders will have their say whilst amending positions to close both the month and quarter.

The single currency is still not having the best of times and continues to be under pressure against the Pound especially. The BoE decision did create £ weakness, however the next day's PMI data reversed things quickly. A painful reading from France showed services falling to a 28-month low which drastically missed consensus with manufacturing remaining at a 37-month low.

This was followed by another shocking release out of Germany which saw estimates easily missed in both their services and manufacturing sectors, turning on the heat for the ECB. Weakening demand saw the Euro-Zone economy grind to a halt towards the end of Q2 and has risen recession fears. This week sees daily data from the EU and we can see the € struggle continuing..

We mentioned last week that the £-$ is definitely a buy in our opinion, which proved to be right as the pair is down 1% since. But, we also stated that things are likely to continue improving past the week, which is still the outlook. It's a tricky one to decide whether to stick or twist this time round due to the sheer number of data releases involving the US. So as always, we would suggest hedging some, most or all of that is required to bank the recent rise on the pair.