The pound initially opened last week’s session on stable footing as GBP investors welcomed Scotland’s lifting of its remaining coronavirus restrictions.
Sterling appears to be consolidating these gains at the start of this week, with GBP/EUR stable at €1.1747, GBP/USD buoyed at $1.3016, and GBP/CAD flat at C$1.7115. GBP/AUD and GBP/NZD are holding steady at AU$1.8836 and NZ$1.9681 respectively.
Looking ahead, it looks to be a quiet session this week as the Christmas holidays create thin trading conditions.
What’s been happening?
After spending most of the week on the defensive, the pound finally found its footing on Friday, rallying on the back of an upbeat GDP reading.
The Office for National Statistics (ONS) revised UK economic growth up from 0.3% to 0.4% in its final GDP reading for the third quarter.
This built on some initial gains made following the announcement that Andrew Bail will replace Mark Carney as Governor of the Bank of England (BoE) when Carney steps down next year, with Bailey being seen as a ‘safe pair of hands’ by GBP investors.
Friday also saw UK parliament overwhelming back Boris Johnson’s EU Withdrawal bill by 358 to 234, putting the UK on the path to leave the EU on 31st January.
While this provides more short-term clarity on Brexit it failed to inspire GBP exchange rates amid concerns the UK is still at risk of a no-deal Brexit next year.
The euro tumbled at the end of last week’s session, with the single currency being undermined by the Eurozone’s latest consumer confidence index as it showed household sentiment had fallen to a new two-year low in December.
Meanwhile, the US dollar was buoyed on Friday with the publication of the latest US PCE price index as a surprise acceleration in the Federal Reserve’s preferred indicator of inflation bolstered hopes the bank will avoid any more rate cuts in the near-term.
What’s coming up?
Looking to the week ahead, volatility is likely to be limited in the pre-holiday lull amid a lack of data and thin trade.
The only economic release of note this week will be the publication of the latest US durable goods orders, with the US dollar potentially strengthening following their release on Tuesday as economists expect they will show another bump in order growth last month.
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