Brexit takes back seat, for now
It again demonstrates that for the moment, Brexit has taken a back seat in terms of what is driving exchange rates, with the traditional economic data coming back into focus. The UK economy continues to perform robustly and many in the market think the Pound is undervalued and will bounce back. I tend to agree that the Pound has been unfairly punished since the referendum result, however it will probably be some time before we see GBP/EUR rates back to €1.30. Once Brexit negotiations begin in earnest the market will start to be moved by political events again and that will probably hold the Pound back from making any significant gains.
Fixing a GBP/EUR exchange rate
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What else could move the Pound this week?
There is a raft of data from the UK on Friday that is likely to move the Pound against other currencies. We have House Price information, Industrial and Manufacturing production figures, Trade Balance Data, and a GDP growth estimate. The numbers are already forecast well in advance and it's whether the numbers are better or worse than expected that will affect Sterling accordingly, much like this mornings Services Data.
Friday is also busy for the USA with Average Earnings and Non-Farm Payrolls. The latter often causes large movements in GBP/USD rates, as the figure usually comes in significantly above or below forecast.
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