GBP: Bank of England meeting on Thursday

EUR: Little support

USD: Jobs numbers on Friday

Sterling

Sterling’s focus this week will naturally fall on Thursday’s Bank of England meeting. A lot of the recent increase in sterling has been down to other factors – Covid-19, the wobble lower of the US dollar following last week’s Federal Reserve meeting – but this week the pressure will come from Threadneedle Street.

Within the Bank of England there are only 1-2 policymakers who are happy to make hawkish statements, bringing interest rate expectations forward from the end of 2022. Some banks have already started to bring forward their thoughts of when the base rate will come away from its current ultra-low level.

We don’t expect sterling to make too much ground before Thursday however, we expect the end of the week to be pound positive.

Euro

Wednesday’s retail sales are likely a bit of a red herring for the euro, and we expect that the single currency may once again struggle to overcome currencies like the pound and the US dollar. The communications from the European Central Bank at the moment are extremely dovish and we cannot expect the euro to drive too much higher as a result.

Data from Europe due this week may be more positive than previously but with those dovish comms from the European Central Bank the euro is trying to run with a lot of baggage on its back.

USD

A week that would typically see dollar strength translated into dollar weakness as Friday closed off, leaving the greenback in a strange position. Typically a Fed talking about ending its stimulus program and a Chinese government crackdown on some investment activities would generate USD strength but this has not come into effect.

The data calendar also picks up this week with the US jobs release on Friday as well as ISM sentiment numbers today and Wednesday. Likewise it makes sense that conversations on the debt-ceiling within Congress will also have an impact on the dollar and rate expectations.

Elsewhere

While the Olympics may have passed off without much of a hitch, rising Covid-19 cases in Japan and Tokyo is increasing the chances that the recent positive run for the Japanese yen may be coming to an end.

Friday’s US jobs numbers are also important for the JPY with signs of a strong recovery also likely to dent the yen.

Market rates

Today’s Interbank Rates at 10:06 against sterling. Movement vs Monday.

Euro	€1.171 ↓
US dollar	$1.392 ↓
Australian dollar	$1.892 ↑
South African rand	R20.17 ↓
Japanese yen	¥152.6 ↓

Have a great day.