A difficult week for sterling last week as it lost nearly four cents against the US dollar, falling to its lowest level against since June 2010. A number of factors were the cause of this but close to the top of the list is the continuing uncertainty over the UK General Election, now less than a month away. Despite the uncertainty, sterling performed well against the euro, as fears over the Greek debt crisis continue.
This week there are two key data releases; inflation data tomorrow and unemployment data on Friday. The inflation data is expected to show it close to zero. The worry is that it becomes negative and even though the reasons are “sensible” in that international energy costs have halved, it would undermine sterling.
UK labour data on Friday looks set to be the only other major fundamental economic data released from the UK this week. Average earnings over the previous three months are expected to show further strong growth, as wage growth continues the strong recovery already seen in 2015. Supporting this will be the latest unemployment rates, which should show a further fall to 5.6%, the lowest level since September 2008.