The British Pound has begun the week trending in a tight range against the US Dollar (GBP/USD) and Euro (GBP/EUR). Currency markets could be in for a quiet start to the week by virtue of limited economic data, although mounting political risks remain front of mind. Escalating tensions in the Middle East and the imminent appointment of a potentially controversial new UK Prime Minister are just two such factors. The prospect of a Federal Reserve rate cut next week is also very much in focus, while a slide in oil prices last week helped the Pound to Russian Rouble exchange rate (GBP/RUB) rebound from its test of year-and-a-half lows.
Economic Data Thin on the Ground as New Week Starts – GBP/EUR in Tight Range
The British Pound Euro exchange rate (GBP/EUR) has started the week broadly unchanged ahead of what is likely to be a quiet day in terms of economic data. However, the risk of political influence, both at home and further afield, has the potential to inject a meaningful degree of volatility in the near-term, with factors ranging from an increasingly tense situation in the Middle East to the appointment of a new Prime Minister both very much front of mind. Exactly how either of these scenarios may map out and their subsequent impact on the British Pound is difficult to call at present, but both provide a degree of uncertainty for the currency and typically that’s not a positive factor. Anything that provides clarity could ultimately offer a degree of support for Sterling.
Chicago Fed Index Could Provide Further US Rate Clues
One economic reading which may provide some interest given the lack of data elsewhere is the Chicago Fed’s National Activity Index. This print is designed as a measure of broad economic activity, which includes accounting for inflationary pressures. Although consensus forecasts offer little of concern here, some outliers suggest the number could fall sharply, down to lows not seen in over five years. That would heap pressure on the Fed to deliver a rate cut next week, so combining this with the fact that rising oil prices often correlate with a falling Greenback and the Pound US Dollar exchange rate (GBP/USD) may have the potential to find some support in the short-term. Sustaining that through the seemingly inevitable bout of political uncertainty the UK will be exposed to later in the week may prove rather more difficult.
Why Did it Move? Pound to Russian Ruble (GBP/RUB) exchange rate
The British Pound Russian Ruble exchange rate (GBP/RUB) has gained ground following last week’s test of seventeen-month lows. Russia is one of the world’s largest producers of oil, so the recent slide in crude oil prices has been less than favourable for the country’s economy, although with tensions escalating in the Middle East and with energy prices subsequently rising, any weakness for the Ruble could prove to be short lived. From lows of 77.825 on Wednesday, the GBP/RUB exchange rate has traded up to 79.090 overnight.