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Strong week for Sterling despite political pressures

Published: Monday 19 March 2018

  • Sterling continues to strengthen ahead of massive data week
  • Central bank decisions and statements awaited
  • Canadian data expected to be positive
​​By David Johnson

I keep laughing at news readers who are so alarmed that we have snow in Britain in March. They cite climate change an all sorts of nonsense. I was married nearly exactly 36 years ago and there was a lot of snow around at the time; so much so that we wondered if everyone was going to get there. Get over it, news people. 
Big week for the Pound
Away from the beasts of the east, the markets watched Sterling have rather a positive week last week. We start this one with the Pound just shy of USD 1.40 and at €1.1350 or thereabouts. Sterling is also stronger against many other currencies. The Pound had been battered by events in the previous few weeks, so some sort of recovery was overdue and GBP isn’t pushing out of the top of its trading ranges overall, so we can’t get carried away. Nonetheless, this is a big week for UK data and I do mean BIG. Average wages, unemployment, government borrowing, Bank of England (BoE) decisions, retail sales data and the usual Brexit rhetoric are all set to assault us. We will also have the ongoing repercussions of the ‘Russian germ warfare’ plot to keep things lively. If the Pound doesn’t have a volatile week, I will eat my hat; and I really don’t want to do that, because it is blooming freezing out there. By the way, no change is expected from the Bank of England and the rest of the forecasts for all of this data are generally positive, so a strengthening bias to the Pound’s fortunes is most likely.
As well as the BoE, there are other central banks in the news. The Reserve Bank of Australia will publish its minutes; hopefully hinting at their rate hike plans. As well as the BoE, there are other central banks in the news. The Reserve Bank of Australia will publish its minutes; hopefully hinting at their rate hike plans. The Pound is currently at its highest against the Australian Dollar since the Brexit vote, so it will be interesting to see if any commentary from Australia’s central bank will boost the AUD.

Could the US up interest rates?
The US Federal Reserve may well outline their plans for the reduction of Quantitative Easing (QE) and the increase of the base rate, but I think the date for the next rate hike is likely to be some way off.
New Zealand’s central bank also due to review interest rates
The Reserve Bank of New Zealand will also review their base rate. At 1.75%, it is currently very attractive to investors and that is holding strength in the NZD. I doubt they will change that this week, but they are acutely aware of the damage a strong NZD does to the economy and to New Zealand exporters.
Canadian Dollar could strengthen on economic data this week
It isn’t just a week for the central bankers, as Canada will publish its inflation and retail sales data; all of which is forecast to be strong. Canadian Dollar strength in the latter part of the week is very likely if that is accurate.
Eurozone also expects flurry of data
The Eurozone has a slew of business and consumer sentiment indices due for release this week. The Eurozone economy is in recovery mode and the data is expected to reflect that. There is still concern over Italy’s election results and Brexit is still a thorn in the EU’s side, but the Euro should have a reasonably positive week if that data is as expected.
You’re grounded…
And I laughed at the story of Michelle Gigger (great name by the way) who was fed up with her four children playing on the phones at all hours of the night. So she confiscated their phones, but the children had the last laugh. They set a series of alarms on their phones which sounded off at random intervals throughout the night. I say ‘the last laugh’ but Michelle tweeted, "I'm impressed with their ingenuity and team effort. They're all grounded."
Winning Bid

During an auction of exotic pets, after a bidding battle that lasted ages, the winning bidder had bought herself a striking Scarlet Macaw.

When she went to settle the bill, she told the auctioneer, "I'm paying a fortune for that parrot. I hope he talks as well as you say he does."

"I guarantee it, madam," replied the auctioneer. "Who do you think was bidding against you?"

Today's Major Economic Releases

Market BST Data/Event Previous Expected
All Day One G20 Meetings    
EUR 10:00 EU: Trade Balance 23.8b 22.6b
EUR 11:00 EU: German Buba Monthly Report    

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