Sterling Exchange Rates this week (Tom Holian)

GBP USD Slide Lower Gathers Momentum
Tom Holian
Tom Holian

Following the massive jump in UK Retail Sales on Friday this has kept Sterling high across the board this morning. With Martin Luther King day being celebrated in the US we are unlikely to see much movement on GBPUSD exchange rates but expect Sterling Euro exchange rates to be rather volatile during the early to middle part of this week.

The Retail Sales figures were the highest they’ve been in 9 years and caught investors by surprise. This saw Sterling hit 1.21+ against the Euro and 1.64+ against the US Dollar. We also touched above 1.87 against the Australian Dollar.

The main movers for this week will be the Bank of England minutes due out on Wednesday morning closely followed by the UK’s claimant count. the minutes are unlikely to provide much surprise so all eyes will be on the Claimant count. If the figures are positive we could see further Sterling strengthening across the board.

Mark Carney has said that UK interest rates will not be changed until UK unemployment is less than 7%. With this target getting closer if the news is good on Wednesday this could provide further fuel to the argument of increasing UK interest rates.

The Euro is clearly struggling at the moment and with France narrowly avoiding recession during the final quarter of 2013 there is cause for concern for the single currency. With Germany recently posting only 0.4% GDP my feeling is that we could see the Eurozone going into recession later this year, possibly by quarter 3.

On Thursday the Eurozone announces both manufacturing and services data so any slowdown could result in further Euro weakness.

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