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Sterling Remains Buoyant

Sterling Remains Buoyant

The pound to euro exchange rate rose tepidly above 1.20 for the first time since February 2020 last week and could be set to remain buoyant above the 1.1950 level over the coming days, although upside for Sterling may be limited by a pick up in performance from our European counterparts.

Pound Sterling held onto early January’s gains over most major counterparts last week but was little changed against the single currency by the Friday close after a mid-week rally in EUR/USD helped to cut short the pound to euro exchange rate’s earlier foray above the 1.20 handle whilst similarly against the dollar, failed to break the 1.3750 mark to close off the week.

In level terms, the softer tone to the dollar sees EUR/USD start this week up above the 1.14 threshold. Cable (GBP/USD) is operating in the top half of 1.36-1.37, having been above the 1.37 threshold for a period last week whilst the GBP/EUR remains just shy of 1.20. 

This week, a busy UK data docket will garner close attention. CPI inflation is projected to edge higher to 5.2% in December, further evidence of how tight the jobs market is currently in the UK. If the data prints as expected, it could reinforce market expectations of a rate hike from the BoE in February. Meanwhile, a quieter day in the US with markets closed for Martin Luther King day bank holiday.

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