Will Thursday’s Decision Provide Further Strength for Sterling? 


After falling to multi-month lows against the Euro after inflation data, Sterling has started to regain some ground, outperforming most G10 currencies last week.

Most of the movement for GBP|EUR & GBP|USD was driven by factors on the other side of the pair rather than Sterling itself. However, this could change next week, depending on the Bank of England’s decision and the following commentary.

Due to the lack of data releases from the UK last week, all eyes were on Fed and ECB interest rate hike decisions. Both central banks raised interest rates by 0.25%, moves that were both fully priced in by the market. However, the ECB refusing to commit to further interest rate hikes, led GBP|EUR to regain to the 1.1640 level we are seeing currently. The post rate hike Fed conference gave little away and insinuated that they are happy to be guided by data releases in the coming months.

The Bank of England (BoE) is set to announce its latest monetary policy decision on Thursday and the market anticipates an increase of 0.25%. Although there’s a possibility of a 0.50% hike, the recent lower-than-expected UK inflation provides the BoE with some flexibility. Investors will be closely watching the accompanying statement. If the BoE remains hawkish then we may see further Sterling strength, however as there are still fears of a recession in the UK, should the BoE start to take a dovish stance, we could see Sterling go the other way.


The Euro struggled last week due to a few factors. The main driver being a lack of certainty in the ECB’s future plans to hike interest rates. This coupled with weak economic data coming out of Germany further dampened the Euro. 

CPI and GDP figures for Germany and Spain are released Friday. If the outlook is as glum as the recent data coming from Germany, we could see the Euro slump further against its G10 peers.


There are a number of impactful US data releases this week  which will most likely cause volatility. 

Manufacturing PMI Tuesday, Employment change Wednesday and nonfarm payrolls on Friday. Any weakness in these figures and we could see the Dollar come under pressure. Combine this with a hawkish stance from BoE and we could see new yearly highs tested for GBP|USD.