Sterling exchange rates hang in the balance
Sterling exchange rates once again hang in the balance following a subdued start to the week. Yesterday, the pound recovered most of the gains lost during Tuesdays session, however, struggled to break much higher.
Data released on Monday triggered the sterling sell-off after the pound had risen to monthly highs against the dollar and the euro towards the end of last week. PMI data confirmed the UK services industry contracted last month, which is negative for the country’s economic outlook.
Earlier in the week, the CBI (Confederation of Business Industry) confirmed their belief that the UK recession will continue into next year. GDP figures released yesterday confirmed the eurozone economy is still growing. The EU economy grew 2.3% over the last year and 0.3% over the last quarter vs expectations of 2.1% and 0.2% respectively. A continuation of positive growth in Europe could spell trouble for GBPEUR rates if the UK continues to plunge into a recession.
The pounds value is still closely aligned with global risk-appetite which is expected to dwindle in the new year as economies move closer to recession. Now could pose as an opportunity for those with sterling looking to buy foreign currency. Sterling is trading within range of multi-month highs against the euro, dollar, Aussie and Canadian dollar to name a few.
Today and tomorrow are light for economic data from the UK. We will see monthly jobs and PPI (inflation) figures from the US.
Next week will be key for exchange rates moving forward as the ECB, Fed, BOE and SNB all have their policy meetings. Difficult decisions loom for the ECB and Fed as inflation appears to have tailed off in both economies.
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