GBPEUR/GBPUSD
Following on from last week, Sterling remains under pressure against the dollar, weighed down by poor public finance figures released on Friday, and the general bounce in the USD. The Pound is currently trading within a tight range against the Euro, however interbank seems to be holding above 1.1200 (0.8912) for the time being.
The week ahead is due to be a key week for sterling, with final Q3 Gross Domestic Product data (GDP) due for release tomorrow morning. Bank of England minutes are also due for release on Wednesday morning at 09:30. Market analysts will be watching these minutes closely for any significant comments, and/or any indication of future policy.
Last week, the Confederation of British Industry (CBI) raised its 2010 economic growth forecast and suggested that the Bank of England may pause its bond-purchase plan in February as policy makers prepare to raise interest rates.
Gross Domestic Product (GDP) data is anticipated to increase by 1.2% next year after contracting 4.5% percent in 2009. The CBI previously forecasted an expansion of 0.9%. The group are predicting that the bank could raise the benchmark interest rate in the U.K from 0.5% in the second quarter to reach 2% by the end of 2010.
Ian McCafferty, the Chief Economic Adviser for the CBI – confirmed in a recent statement "Growth is very subdued and fragile, particularly in the first half," – he went on to suggest that we could see a "pause" in the asset purchase program.
Prime Minister, Gordon Brown is desperately attempting to resuscitate the economy and rebuild support in time for an election which he must call by June 2010. The forecasts currently suggest that economic growth will resume again with an expected 0.5% GDP increase during the current quarter, marking an end to Britain’s longest recession on record. Recovery will be aided by companies rebuilding stocks to meet a rebound in world growth and as exporters benefit from a weaker pound.
The pound is anticipated to drop further against the dollar and the Euro in the run-up to the election as uncertainty surrounding the election could potentially leave the Pound on the back foot as a currency.
EUR/USD
The dollar dipped against the euro during early morning trading but remains within easy reach of $1.4262 (3-month low) seen during the weekend. A more positive outlook for the U.S economy on the back of recent stronger than anticipated retail sales and jobs numbers, concerns over the debt burdens of Greece and other euro zone countries, and lingering worries about Dubai are also lending support to the dollar.
There is little in the way of fresh data to set direction for currencies today, with FX markets likely to take their direction from stocks. There are, however, some key events over the course of the week ahead, including the release of some leading business and consumer confidence surveys from the Euro-zone, US personal income and spending figures for November.
Data Released 21st December
13:00 NBH interest rate announcement (Hungary)
Related posts:
- FX124 Foreign Exchange Daily Insight – The Pound opened this morning above 1.1200 on interbank
- Sterling continues to remain under pressure
- FX088 Foreign Exchange Daily Insight – The Pound rallies against the Dollar amid an increase in risk appetite
- Sterling expected to come under pressure from the UK Global Trade Balance
- FX068 Foreign Exchange Daily Insight – The Pound’s resolve will be tested this week
