The end of last week saw the pound sterling forecast rising with fresh three-week highs seen for the pound to euro exchange rate, plus for the pound to US dollar exchange rate. GBPEUR interbank rates rose to a fresh high of 1.1185, whilst GBPUSD interbank rates reached 1.2658.
The reasons for this spike were mixed with a continuation of the recent optimism for the pound helping to fuel pound strength. Two of the key reasons that can be considered would be the positivity from the trade talks between the UK and the EU, and also the extensive measures laid out by Rishi Sunak to bolster the economy.
Sterling has also been much lower in recent weeks following rising uncertainty over the potential for a no-deal Brexit, plus the worries and fears of COVID-19 badly affecting the UK’s economic outlook ahead.
Whether or not the optimism will continue is of course a matter of debate, it might be said that the pound has been oversold in recent weeks, as evidenced by this recent rebound. Where previously there was lots of uncertainty over what the economic outlook for the UK would be, there is now some limited confidence that it might not be as bad as predicted.
Further easing of restrictions to allow Gyms to open, and outdoor sport to continue will all contribute to a more positive outlook for the UK, allowing consumers to get out, eat out and start spending again.
What could be a real risk to pound strength is any signs of a second wave forming, that would potentially see the pound losing ground as fears over a second lockdown would increase.
What Events Are Coming up to Shape Exchange Rates Next Week?
Next week could be a very busy time for the pound with the latest UK Gross Domestic Product (GDP) data releases, when inevitably there will be a real focus on whether May’s latest GDP data will reflect an upturn from the 20.4% fall we saw in April.
April saw the UK economy struggling as the lockdown was in full flow, as consumers and business stopped spending. May should be a more positive figure, and any signs the UK could be experiencing a V-shaped recovery, as identified by Andy Haldane, Chief Economist of the Bank of England.
His comments recently had helped the pound to find some momentum, since he has been focusing not just on the economic data like GDP, but also more freshly released data such as footfall in shops and also spending in certain areas of the economy.
Next week’s data will be of importance for the pound and in shaping expectations for the UK ahead. As well as the all-important GDP data we will also be looking at the latest Inflation and also Unemployment data for the UK, both key metrics in shaping the picture of UK plc.
For any trades involving the pound, it will be interesting to note the outcomes of these data releases, to see how they influence the current sentiment. Expectations ahead for the pound may well be shaped by these pieces of news, any signs that the UK is performing well on the economic data front might well see the pound rising.
Other signs that perhaps the economy is not performing well, could see the pound losing ground. It is worth remembering that there had been many comments from Bank of England members that they might consider cutting interest rates ahead, or indeed increasing the Quantitative Easing (QE) program to help support the economy.
Economic data will therefore be key to shaping these expectations and this news will be worth monitoring as we enter next week, if you have a trade involving buying or selling the pound and wish to learn the latest sterling forecast, you can contact us to learn more and be kept up to date as the news and sentiment evolves.
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