The pound initially opened last week’s session on stable footing as GBP investors welcomed Scotland’s lifting of its remaining coronavirus restrictions.
Sterling is still struggling this morning, with GBP/EUR dipping to €1.1697, GBP/USD slipping to $1.2974, and GBP/CAD muted at C$1.6956, while GBP/AUD and GBP/NZD both trend lower, striking AU$1.8882 and NZ$1.9631 respectively.
Coming up, the spotlight is on the European Central Bank (ECB) this week as it holds its first policy meeting of the year.
What’s been happening?
The pound faltered at the end of last week on the back of some dire UK retail sales data.
According to data published by the Office for National Statistics (ONS), domestic sales growth contracted 0.6% in December, missing expectations that the Christmas period would see sales expand by 0.5%.
The abysmal reading sent alarm bells ringing for GBP investors and saw the odds of a Bank of England (BoE) rate cut in January climb above 70%.
The euro also came under pressure on Friday after comments from the new European Commissioner for Trade, Phil Hogan, reignited concerns regarding US-EU trade tensions.
Meanwhile, the US dollar trended higher at the end of the week, buoyed by the weakness of its peers, although some softer-than-expected industrial production figures capped the upside in the currency.
What’s coming up?
Looking ahead, the focus this week will be on the European Central Bank as it holds its first policy meeting of 2020.
While the ECB is not expected to make any changes to monetary policy this month, there’s a lot of buzz regarding the bank’s strategy review and whether this could involve altering the bank’s inflation targets.
For the pound, the main catalyst of movement looks to be the release of the UK’s latest employment figures.
This may see Sterling struggle as an expected slowing of wage growth in November will put even more pressure on the BoE to cut interest rates this month.
Finally, in the absence of any notable US economic data we may see politics drive movement in the US dollar this week as Donald Trump’s impeachment returns to the spotlight.
Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure
Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)