The current spell of sterling weakness started on Thursday when it was announced that May was going to deliver her long-awaited Brexit speech this Tuesday. While the pound depreciated against both the dollar and euro on Friday, it didn’t break the current trading range that we’d seen recently.
May’s speech will be closely watched and interpreted by the markets as well as European leaders. Last week the Guardian reported that ministers believe that the government was very likely to lose the Supreme Court case. We should find out either this or next Wednesday. The newspaper went on to state that the government had asked the court for early sight of the decision in order to plan ahead. There is speculation that this indicates that the Supreme Court will make an announcement this Wednesday.
In addition to May’s speech, this week is packed full of tier-one economic data releases. On Tuesday we have the UK’s key inflation reading, which is expected to push up to 1.4% from 1.2%. The Bank of England has already highlighted that UK inflation is set to rise.
This is followed by unemployment data and average earnings on Wednesday. The unemployment rate is expected to remain constant at 4.8% whilst average earnings are expected to come in slightly higher. Average earnings will remain a focus of attention, especially if the inflation figure exceeds it. The final key economic reading is due on Friday in the form of Retail Sales data which is expected to increase by 6.4% year on year. This figure is key as it makes up a large proportion of the UK’s GDP.
No doubt this will be a big week for British importers and exporters as new key economic data will paint a better picture of how the economy is performing. May’s speech will either instill optimism or fear. Businesses with any unhedged currency exposure may want to give their currency provider a call today to discuss this.