Last week was a busy and volatile period. Several key data releases were released last week which impacted the pound.
We saw UK inflation take the biggest jump in 3 years to 3%. UK unemployment rose to 4.6% with the Pound taking a hit. The biggest surprise of the week came on Thursday when the Bank of England’s Monetary Policy committee voted on whether to change interest rates in the UK. It was expected the 8-person committee would vote 7-1 in favour of keeping interest rates unchanged, however 3 members of the committee voted for an interest rate hike suggesting a change could be sooner than thought to curb inflation.
Today we have the beginning of the Brexit negotiations. This will be heavily monitored and scrutinised period for the pound and it will be very important to be positioned correctly if you are looking to buy or sell the currency.
EUR/USD traded in a volatile fashion in the past week, driven by speculation and the subsequent pricing in of the Fed’s stance on monetary policy. Some market participant believed the Federal Reserve would delay an expected rate hike as recent data releases have been disappointing. This fuelled a dollar decline ahead of the meeting as markets gambled the FED would remain unchanged on interest rates.
The FED remained strong and raised interest rates to 1.25%. The dollar regained early day losses against its major counterparts that resulted from the earlier CPI and retail sales miss.
The week ahead
All eyes will be on Theresa May this week as the UK enter formal exit negotiations with the EU. Markets will be strongly dictated with news and rumours coming out of these meetings in the coming weeks and months. Volatility will remain high during this period. Bank of England Governor Mark Carney speaks tomorrow which will give some insight as to what he expects will happen the Pound over the coming months.