Currency Note

Pound-watchers in for an interesting mix of data this week

By Christopher Nye February 27th, 2023

Rishi Sunak and European Commission President, Ursula von der Leyen, will meet in Berkshire today to discuss a new NI brexit deal.

The pound begins the week stronger against a handful of its rivals, compared to this time last Monday,  as markets prepare for a mixed bag of economic releases.

Deputy governor of the Bank of England, Ben Broadbent delivered the opening speech at the BoE agenda for research conference in London in the early hours of this morning.

We’ll also see the latest durable goods figures from the US later today. If the figures fall by 3.5% as expected, currency markets are likely to be pleased.

In Brexit news, the prime minister and European Commission President, Ursula von der Leyen, are expected to agree on a new Northern Ireland Brexit deal. The two will meet in Berkshire later today where they are expected to sign off on a new agreement.

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European stock markets were headed for a muted open this morning following weak global sentiment caused by stronger-than-expected US economic data, which bolstered expectations that the Fed will need to remain hawkish in the fight against surging inflation. Investors look ahead to a plethora of eurozone economic reports, including consumer confidence data.

In Asian trading, Chinese stocks slid for the fourth consecutive session following hotter-than-expected US inflation data which boosted expectations that the Federal Reserve will need to continue raising interest rates. The Shanghai Composite fell 0.28% to close at 3,258 while the Shenzhen Component lost 0.73% to 11,702 on Monday.

Other key economic data releases investors will be looking out for over the course of this week include Canada’s monthly GDP figures, the USA’s CB consumer confidence index.

Market-watchers will also be listening out for speeches from central banks, including the BoE’s governor Andrew Bailey, who is scheduled to speak at the cost of living crisis conference in London on Wednesday. Sterling-watchers will be paying close attention to Bailey’s comments as for any clues on the future of monetary policy.

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GBP: Strong entrance to the week for sterling

Sterling maintains gains made last week against the euro but its weaker than the US dollar on a weekly comparison. Over the same timespan, the pound has also come up stronger against the canadian dollar while weaker than the indian rupee. PMI boosted the pound last week and investors will be looking to impactful data releases scheduled in this week, which could have a similar impact on the currency.

GBP/USD over the past year

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EUR: Markets look ahead to ECB MPC meeting accounts

The euro is weaker against the pound and US dollar compared to last Monday. A detailed record of the European Central Bank governing board’s most recent meeting will be released on Thursday. This will provide markets with insight into the economic conditions that will be influencing the central bank’s decision on where to set interest rates.

Euro-watchers will be particularly keen to hear more hawkish comments as these tend to be good for currency.

USD: Dollar index at seven-week high

The US dollar begins this week on a stronger weekly footing against the pound, euro and a handful of rival currencies.

The dollar index (DXY) rose to a seven-week high of above 105, after the latest data showed the Fed’s preferred gauge to measure inflation grew more than expected in January. This supports the Fed’s case for further monetary tightening.

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