Last week we saw the pound continue its strength throughout the week due to positive data releases and positive movement from the House of Commons on Wednesday. We are now coming to a point where the market is just waiting for Article 50 to be triggered. I feel there is nothing left for the Prime Minister to say about the matter, and I look forward to the negotiations with Europe beginning. Though this will provide a lot of uncertainty to the market, it will also mean we are closer to a solution.
Though the news isn't reporting much about it, the problems with Greek debt are slowly getting more serious. Greece is poised to miss a deadline on the 20th February, the issue with this is that both Germany and the Netherlands have threatened to end the debt relief program if a deal isn't reached that includes the IMF. I personally feel that these debt talks will be resolved, main reason being is that the EU cannot afford to lose another member and will do everything within their power to keep Greece on their side.
Moving on to this week, we should start to see some positivity from Tuesday, specifically for the GBP/EUR exchange rate. At 9:30 the UK will release CPI (Inflation) figures which should show that inflation has grown again over the last month, so far this is something that is deemed positive, but eventually the focus will be on average earnings and wage growth in the UK, if that doesn't grow with inflation, then we will start to see GDP contract as well.
Speaking of average earnings, on Wednesday all jobs figures will be released out of the UK, again, this is all expected to be on par with expectations but if it does show some growth or contraction then I expect to see the market move. Later on Wednesday, the U.S will release their CPI figures, which are expected to come in slightly lower than last month, if this is the case then this could provide some great opportunities for those of you selling sterling to purchase US dollars.
Fed Chair Janet Yellen will deliver her semi-annual monetary policy testimony on Wednesday afternoon. This will be closely scrutinised as the markets are looking for guidance on when the Fed is looking to do their next interest rate hike, and how the economy is reacting to the last hike in December.
The rest of the week will be pretty quiet until Friday where the UK will release Retail sales figures, which are expected to come in weak (Spending is always less in January after the Christmas period) so this could weaken the pound off slightly if we do see the data come out as expected.
My take on this week is that the best opportunities should arise on Tuesday-Wednesday but this is providing the data comes out as expected, and much of it could be priced in. As I mentioned last week, we are getting to a point now where the pound is hitting a ceiling for strength as many investors are still concerned about the UK leaving the EU and triggering Article 50, so if you get an exchange rate that works in line with your costs, it is well worth putting something in place to secure it.