Things Looking Up for GBP
The Euro pulled back from its recent highs yesterday as the crisis in Egypt continued giving sterling a chance to climb firmly back above the 1.17 mark. The Euro has been boosted recently due to expectations that a rate rise may soon be on the cards although these views may have been a little overplayed and added to some of the recent Euro weakness.
We have quite a busy day on the data front today with both UK and Eurozone PMI figures out this morning which should show if the weather was the problem in December or if there is an underlying weakness. This is followed by European retail sales data and the ECB rate decision this afternoon. Many will be listening to Jean Claude Trichet’s speech to try and get a handle on the ECB’s view on rate hikes although the likelihood of a rate rise today is minimal. Inflation is becoming a problem in Europe as it is in much of the world and should the ECB decide to try and head it off with higher rates it will benefit the Euro massively and the weakened pound would give rise to more imported inflation from Europe.
This afternoon we have the initial jobless claims for the US which is expected to show a slight drop. The USD has been on the back foot recently as risk appetite has increased reducing the demand for safe haven currencies.
All in all it could be a very volatile day on the currency markets although data out today should give some direction.