Sterling steadies, Friday's GDP figures eyed
GBP v EUR ended up losing a clear 2-cents last week after the BoE interest rate announcement. The Pound managed to drop a further 0.5% on Friday, as traders got to terms with the MPC comments following the decision. Things were looking worse when markets opened this morning with the pair hitting a 1-month low, but Sterling has managed to turn it around across the board with some help from the stock market.
The $ has been sold-off today and the high-beta currencies have shot up because of two market catalysts. First, we have the US midterm elections which the market has priced in a split congress. There is an outside chance that the Republicans gain control and if so, would be deflationary to the US (bad news for USD). Thursday, sees the release of the inflation number and economists expect to see a slight drop in the rate.
Overall, it's a quiet week on the market data-wise (until Friday that is), but that doesn't mean rates will stagnate. There has been a 1.2% swing today alone, up from its normal volatile 0.5% each day. Friday's UK GDP data will be scrutinised closely and a miss from the -0.5% forecast and we will see £ fall. September is very likely to show a minus figure regardless, due to the cost-of-living crisis and an extra public holiday for the Queen's state funeral. Another 50-50 week ahead for GBP..