Last week, the market found political developments continually impacting currencies as Brexit and US-China trade talks unfolded. The week ahead is likely to continue with politics in focus, but there are some pieces of economic data which will be watched closely.
Update: GBP/EUR, GBP/USD Exchange Rates in Tight Range ahead of May’s Statement
Both the Pound to Euro (GBP/EUR) and Pound to US Dollar (GBP/USD) exchange rates have begun the week in a tight range as investors await Theresa May’s statement in parliament. GBP/USD has been within an interbank range of 1.2880 and 1.2830, while GBP/EUR has been trading in the regions of 1.1330 and 1.1283.
Meanwhile, data has shown Chinese growth has dropped to its slowest pace in almost 30 years. China’s economy recorded 6.6% growth in 2018, a 28-year low, as the effects of the US-China trade war came to light.
The week begins with politics very much in the spotlight, with Theresa May unveiling her statement to parliament on Brexit. A recent amendment by politicians gave her only a three-day deadline to inform MPs of her next move. It will likely be revealed whether cross-party talks have taken place or could be on the agenda, as well as giving some insight to the possibility of another referendum or general election. If it appears the UK may be headed towards another general election, the Pound exchange rate may sink. The US markets are closed for a public holiday, and other economic data is thin on the ground, meaning politics will likely be the main influencer.
UK employment data could create some Sterling exchange rate movement. Wage growth is forecast to show a small decline, but remain above 3.0%, while the unemployment level is expected to stagnate at 4.1%. Meanwhile, the Eurozone and German sentiment levels will be detailed in the latest ZEW surveys which could reflect Brexit uncertainty and global trade woes.
There are many concerns over the health of the Eurozone economy, and Wednesday’s flash Consumer Confidence print is expected to show another decline. It seems predictable that another drop would take place, given the European Central Bank (ECB) recently ended its quantitative easing programme at a time when economic data was weakening. Forecasts suggest the January reading will come in at -6.5 down from the previous -6.2 reading–a two-year low.
The European Central Bank is due to announce its latest interest rate decision. There is speculation that the central bank will need to look at putting in place some different kind of stimulus despite ending its sovereign bond-buying recently. If there’s any hint of this, the Euro could take a hit.
German IFO Expectations data will be out on Friday and could be interesting in terms of providing an indication of the sentiment in the Eurozone’s largest economy.