We have seen a fairly slow start to the trading week for GBP/EUR exchange rates, potentially with the Euro just about edging it and making small gains over Sterling.
Due to the fact we have entered a new trading month the key over the next few days will be economic data for both areas.
We will start to see economic data filter through for how both the U.K and Eurozone performed in June and I believe there will be a particular focus on U.K data as this will impact the likelihood of an interest rate hike in August.
At the most recent interest rate decision last month Bank of England members voted 6-3 in favour of keeping interest rates on hold but comments after this decision suggested that a rate hike may be likely if economic data is good.
Presently the city is pricing in a 50% chance of a hike in August, and over 90% chance of a hike by the end of the year.
For those who are not aware a rate hike is generally seen as a positive for a currency as it makes that currency more attractive to investors, and even the mere speculation of a hike can give a currency a boost.
With U.K construction, services and house price data out over the course of the week, not to mention a speech by Governor of the Bank of England at 11am on Thursday we may build up a clearer picture of just how much chance there may be of a rate hike at the next bank meeting in August.
In my opinion I feel the time is right for a hike and a good run in the world cup by the English football team would not do the economy any harm either, as this would give us a big boost to our growth figures. Positive data this week and a good tone from Mark Carney may give the Pound a solid week, but do be wary there are further brexit talks going on as the week continues which does have the possibility of knocking us back a little.
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