Pound falls from best levels before UK inflation data

The pound seesawed over the course of last week, with GBP jumping on Thursday following the Bank of England (BoE) interest rate decision before giving up all its gains ahead of the weekend.

GBP/EUR fell from a high of €1.1441 to €1.1278 while GBP/USD dropped from $1.4148 to $1.3772, GBP/AUD slid to AU$1.7711 from AU$1.7979, GBP/NZD plummeted from NZ$1.9449 to NZ$1.9087 and GBP/CAD lost 2 cents to close the week at C$1.7400.

Will the pound keep sliding this week? Read on to find out…

What’s been happening?

Comments from EU chief negotiator Michel Barnier sent Sterling spiralling lower against the majors as last week drew to a close.

Barnier highlighted that time was running out to strike a Brexit deal, and that Brussels was still finding understanding the position of the British government problematic.

Barnier asserted: ‘I'm surprised by these disagreements and if they persist, a transition is not a given. I wasn't talking about a threat. We have to bear in mind what the UK has said. I have some problems understanding the position.

They themselves asked for this transition period. The EU27 heads of government said yes on the basis of very logical positions. It's understandable. But if this disagreement were to persist there will undoubtedly be a problem.’

While the pound struggled on Friday, the euro was bolstered by a breakthrough in German coalition talks and the US dollar firmed amid speculation that the Federal Reserve will increase interest rates next month.

What's coming up?

While Brexit developments are likely to remain the main cause of GBP movement in the week ahead, there are a couple of high-profile UK data releases to watch out for as well.

Firstly we’ve got the nation’s inflation figures for January. The rate of non-core inflation is believed to have fallen in January. If it dips by more-than-expected it could weigh on Bank of England (BoE) rate hike expectations and undermine demand for Sterling.

The UK’s retail sales report for January will also be of interest. If consumer spending surged in line with economists’ forecasts, it could give the pound a lift before the weekend.

In terms of euro-moving news, we’ve got German growth and inflation data and growth figures for the Eurozone as a whole.

The US is also set to publish inflation stats this week, along with retail sales, industrial/manufacturing numbers and the University of Michigan confidence index.

Any reports which are seen to reduce the odds of the Federal Reserve hiking interest rates in March would be US dollar-negative.

We’re here to talk currency whenever you need us, so get in touch if you want to know more about the latest news or how it could impact your currency transfers.

Reaz Rahman
Senior Dealer

Reaz, our Senior Currency Dealer, joined us in January 2015. Reaz draws on his detailed knowledge of the foreign exchange markets to help customers to choose the right service and time to transfer.