Good Morning and welcome back to our regular readers after the Bank Holiday Weekend.
Although UK markets were closed yesterday, sterling fell against the dollar. This is probably caused by investor caution ahead of the Bank of England Interest Rate decision this week, not helped by the thin trade due to the Bank holiday.
With Thursday's BoE meeting looming, analysts said many are very wary of purchasing Sterling, and also the Prime Minister has come in for criticism from a senior Labour Party politician also which also has created unease within investors views of the UK political situation - again knocking the pound.
Currently rates have come back slightly, and against the US Dollar we are now over $1.50, and against the Euro we are at 1.1260, not too far away from 1.13.
Where rates will move this week?
This week is a very busy one for both UK and EU economic data. I'm expecting some big movements in GBPEUR rates. Today and tomorrow we have various inflationary measures for both zones, which will of course influence the most important economic events of the week, the Interest Rate Decisions for the UK and EU.
UK rates are already very low, and I don't really expect any movement here. We may however see announcements for more Quantitiative Easing, which may well weaken the pound and cause rates to fall.
The EU rates are currently at 1.25%, and so there is scope here to make changes. I think we will see a cut in rates, to bring them more in line with the UK and US, however by how much they cut will depend on the other data releases today and wednesday. Bases on the EU situation alone, I would expect GBPEUR rates to climb, however we also need to closely watch any comments from the Bank of England, that could pull Sterling in the other direction.
"People don't want to take a position on sterling due to the risk of the BoE extending its asset buying programme," UBS currency strategist Geoffrey Yu said.
Below is a summary of the weeks data. If you would like to know the effects this data could have on your specific requirements, then please get in touch.
This Weeks Data
Today
Aus - Building Permits
UK - PMI Construction
UK - House Price index
UK - Producer Price Index
UK - Nationwide Consumer Confidence
EU - Producer Price Index
Wednesday
Aus - Retail Sales
Aus - Trade Balance
Ger - Purchasing Managers Index
UK - Purchasing Managers Index
EU - Purchasing Managers Index
NZ - Unemployment
Thursday
Aus - Employment & Unemployment
UK - Interest Rate Decision
EU - Interest Rate Decision
Friday
Swiss - Unemployment
UK - Producer Price Index
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