Challenges and Uncertainties Await Sterling
GBP
Sterling has been under relentless pressure against the Dollar for the past 11 weeks, due to investors and speculators worrying about the UK’ weak economic outlook. Analysts predict that the selloff is likely to continue, with a target of GBP|USD 1.20 in the coming weeks (currently 1.2187 at the time of writing). GBP|EUR also reached a multi-month low of around 1.1470 last week, but found some support at 1.15.
The surprise pause in the Bank of England’s interest rate hiking cycle compounded with weaker-than-expected CPI figures are the main drivers which have led to the Pound’s recent decline.
The release of Q2 UK GDP data on Friday is expected to have minimal market impact. However, any significant deviations from the forecasted 0.4% year-on-year and 0.2% quarter-on-quarter growth could cause short-term volatility.
EUR
The Euro is navigating a challenging phase marked by consolidation and uncertainty from the ECB policymakers. The ECB’s decision to halt its rate hiking cycle has added to the Euro’s volatility.
The upcoming Eurozone inflation data on Thursday is of great interest, with forecasted declines in both headline and core inflation rates. Factors such as base effects, energy prices, and food inflation could influence the inflation figures. Additionally, German inflation data, released a day before, often sets the tone for the market.
USD
The US Dollar has been pressuring most of its G10 counterparts due to investor wariness of a potential November interest rate hike by the Federal Reserve. At the same time, expectations for rate cuts in 2024 have been lowered.
In the upcoming week, investors and speculators will be keeping an eye on the economic calendar, particularly on Friday, as there are two important releases scheduled. However, the preceding days will see some second-tier data, which may not generate much excitement for the Pound-Dollar pair. One key release to watch out for is the U.S. Personal Consumption Expenditures (PCE) inflation figure, set to be released on Friday. This figure holds significance as it can potentially reinforce the recent trend of Dollar strength if it surpasses expectations.
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