We have seen a decent end to the week for the Sterling. GBP/EUR has pushed back into the €1.14’s, and GBP/USD is back in the $1.33’s. Despite todays gains however, when you look back at the charts for the week, the Pound is simply back to where it started!
It was a mixed week for the single currency. The situation in Italy initially caused market jitters and pushed the rate up to 1.15, however a day later and investors had seemingly forgotten the issue. The relevant players backed down, they placed a different candidate in the role, so all is well. For now. There was also the resignation by the Spanish prime minister, which was also largely ignored by the market. This morning a better than expected PMI reading from the UK did catch everyone’s attention, and Sterling has risen steadily since then.
I think that political uncertainties are being overlooked in favour of old-fashioned economic data. This was good, so Sterling went up. Next week, we have lots of economic numbers from Europe and the UK that could move the rate, including UK and EU Services PMI, and EU Retail Sales. UK Services is an important one to watch on Tuesday, as it forms a huge part of the UK economy. A high reading could send the Pound higher.
Again we end the week roughly where we started it, with Sterling/Dollar in the $1.33’s. This one has surprised me a little. Today we had much stronger jobs data from the US which would normally push Sterling/USD lower. I think the reason is perhaps the US decision to start a trade war by applying tariffs to some goods such as steel.
This could be an interesting one moving forward. On the one hand, the type of steel the UK exports to the US, isn’t manufactured in America. So on the one hand this means that US consumers will be paying more. On the other hand, American’s could decide not to buy these goods from the UK or EU, which would reduce demand for Sterling and Euros, so this could also weaken these currencies. Watch this space.
As I mentioned in my Sterling Euro report, next week cable will likely be driven by the UK services data. Watch for a reading above 52.2 on Tuesday 5th June. If we see a higher number, expect Sterling to gain.
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