The pound initially opened last week’s session on stable footing as GBP investors welcomed Scotland’s lifting of its remaining coronavirus restrictions.
While a slowdown in the pace of core consumer price growth from 2.7% to 2.5% year-on-year for December does alleviate the pressure on household budgets – thereby improving the outlook for consumer spending – it also lowers the odds of an interest rate hike from the Bank of England (BoE) any time soon.
However, things picked up on Wednesday after Jean-Claude Juncker, President of the European Commission, observed that the UK could always re-join the EU once Brexit was completed by using Article 49 of the Lisbon Treaty.
French President Emmanuel Macron pressed home the idea of a Brexit reversal on Thursday, when an aide speaking on his behalf told reporters in Paris that France would look ‘with kindness’ upon the UK changing its mind over its decision to leave the EU.
Friday’s retail sales figures somewhat took the shine off the pound after showing a worse-than-expected rate of decline month-on-month, meaning year-on-year sales growth was only around half of what economists had been predicting.
Impactful UK data is in plentiful supply this week, starting with tomorrow’s government borrowing figures and Confederation of British Industry (CBI) orders and selling prices data for December.
Wednesday’s average weekly earnings figures for the three months to November are expected to show no change to pay growth – a somewhat disappointing result for markets, which are looking for an uptick to narrow the decline in real wage growth.
The end of the week promises much Sterling turbulence, with the fourth-quarter GDP figures released in the morning and a speech from BoE Governor Mark Carney in the afternoon.
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