The Pound has started off the trading week up against every major currency, albeit by a small margin with the Dollar and Euro to see it gaining strength at all is a positive start to the week for anyone looking to buy foreign currency.
The reason this is a slight surprise is due to the fact that we had news overnight that the IMF (international Monetary Fund) had decided to downgrade growth forecasts for both the U.K and the U.S, usually this would weaken these two currencies as it would be deemed as bad news.
It does appear that the sheer demand for EUR/GBP trades is driving money out of the Euro and into the Pound as many investors take profits following the sharp movements we saw last week, this is raising demand for Sterling and increasing the value of the Pound.
Will this continue?
The rest of this week is reasonably quiet in terms of U.K economic data as it generally can be at the end of a trading month, but we we do have growth figures due on Wednesday morning at 09:30am and house price data on Friday morning at 07:00am which are worth making a note of.
Around the world there are a couple of other notable releases with the most important in my view being the Federal Reserve interest rate decision and policy statement on Wednesday evening. No change in rates is expected but any comments in the statement giving a nod to another rate rise could lead to a flurry of money back into the Dollar, if the appetite for another hike appears dampened then the Dollar may lose ground and Sterling may benefit.
All in all unless we have any major surprises I would expect Sterling to remain fairly range bound this week but as regular readers will know more often than not we do see surprises pop up in the market. With brexit talks on-going, a Government that isn’t exactly settled and economic data not exactly setting the world on fire the Pound is a little shaky and could still creep down at any time.
I still feel that Sterling is undervalued but we do desperately need something to start the Pound’s fightback!
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