• Pound exploits wider market weakness
  • All eyes on ECB meeting on Thursday
  • Dollar slips on poor data

Sterling exploits wider market weakness

The pound posted a strong performance across the board yesterday, gaining 1.3% against the dollar and 0.6% against the euro following a disappointing week for Eurozone data and poor US data on Friday.

The coming week could provide the pound with more support as a number of data releases look set to continue to paint a positive picture of the UK economy. Tomorrow we have the release of CPI inflation data which is set to remain stable at 2.9% on the annualised figure. With this expected to remain above the BoEs 2% target, it is likely that investors will continue to question whether the Bank of England will look to hike rates in the medium term. This data is followed by retail sales on Thursday which is expected to rise by 1.5% on the annualised index which would likely provide additional support for the pound.

A lack of economic data releases today may see focus fall to wider markets. However, the expectation of positive data this week could limit pressure on the pound.

Euro changeable ahead of ECB meeting this week

The single currency posted a mixed performance on Friday, gaining over half a percent against a struggling dollar but losing 0.6% against the pound. The only economic data release for the day was Italian CPI inflation which remained flat at 1.2% and provided the currency with limited support.

The coming week looks to be relatively quiet for the single currency data release wise. Tomorrow we have the release of German ZEW economic sentiment and current conditions data. Whilst current conditions are expected to remain stable, economic sentiment looks set to fall by over half a point. This is followed by German producer prices on Thursday which are expected to fall by half a percent and could apply yet more pressure on the euro.

Despite these releases the primary focus for the currency will be the European Central Bank meeting on Thursday. Investors will be paying close attention to any comments from Mario Draghi, looking for any hints as to what future economic policy will look like in the Eurozone.

Dollar struggles on wider market positivity

The greenback slipped on Friday, losing 1.3% against the pound and 0.65% against the euro. Disappointing US CPI inflation, retail sales and University of Michigan Sentiment overshadowed a larger than expected rise in Industrial output and left investors continuing to question the likelihood of a Fed rate hike in the short term.

This week, we have the release of import prices, building permits and housing starts followed by weekly jobless claims. With all of these releases looking set to improve from prior, we could see the greenback regain some of last week’s losses. With that said, positive data releases in wider markets could limit the impact the US data has on the dollar.

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