Sterling ended the week in positive fashion against the euro, pushing the UK currency to a 1-month high against the single currency following disappointing core inflation results from the Eurozone. In contrast to this, sterling ended the day in much the same position as it started the day against the US dollar, weakening sharply in the morning before recovering these losses throughout the afternoon.
Following a quiet week, this week’s outlook looks more exciting for sterling, with a range of purchasing managers’ index (PMI) data supported by the latest rate setting meeting from the Bank of England (BoE). Monday sees the release of PMI data from the manufacturing industry, which has been steadily falling throughout the second half of the year so will be watched closely by investors. This release is followed by the PMI data from the construction sector on Tuesday and then the services sector on Wednesday. The services sector release is likely to have the biggest impact on the market as it makes up more than two thirds of the UK’s output.
Thursday will see the BoE announce its latest decision on the UK’s interest rates. Although this has the capacity to create significant movement in the markets, it is highly that unlikely we will see a change in policy this week, and thus we expect to see a muted reaction in the markets following the release. Thursday will also reveal Manufacturing and industrial production figures.