A lack of data last week led to a quiet week for sterling which held its own against the US dollar, lost a little bit of ground against the euro, although still close to seven year highs, and gain ground against the commodity backed currencies.
This week the flow of UK economic data is much busier. Purchasing Manager Indices from the manufacturing, construction and services industries will be released in the first half of the week, promising to provide insight into the state of the UK economy at the start of the new year. Two of the three are expected to show a slight improvement over the previous month’s figures. With the services industry contributing approximately 70% of the value to the British economy, this figure will be looked at particularly closely on Wednesday. Aside from this, the latest decision on interest rates from the Bank of England (BoE) to be announced on Thursday is likely to pass with limited effect on currency movements as the BoE is expected to leave interest rates on hold at 0.5%.
But key drivers for sterling may be the unfolding of event elsewhere. Discussions within the Eurozone about Greece are in full flow and this may become more fraught as the month progresses. And in the US this week we have the release of key unemployment data.