Pound set for a good week, particularly against the Euro

Aug 16, 2019

Sterling has clawed some ground back this week and looks set for its biggest weekly gain in a couple of months.

This follows on from some resilient UK economic data releases this week, including better-than-expected earnings, retail sales, and inflation figures. Previous UK data has disappointed which increased the market perspective that the Bank of England would look to loosen monetary policy soon to stimulate the economy (Pound negative). This week’s data suggests that things might not be as gloomy as previously thought.

Brexit will continue to be the biggest driver for Sterling though. We’ve seen momentum start to grow this week from MPs trying to prevent Boris Johnson from taking the UK out of the EU without a deal, which has lent some further support to the Pound. The outlook over Brexit remains unclear and lots of uncertainty lies ahead as the Brexit departure data closes in. Traders are seemingly using this week’s more upbeat mood in the Pound as a good time to cash-in on some short Sterling positions.

In other news, the Euro has come under renewed selling pressure this week as expectations increase for an announcement of an extra-large stimulus package from the ECB at next month’s meeting (so more QE etc). Coupled with some solid US data this week, traders have been shifting funds out of the Euro and into the Greenback.

As a result, this has pushed the EUR/USD down over 1% this week and to the lowest levels of the month. This has also helped Sterling gain nearly 2% against the Euro this week, pushing the GBP/EUR to a fresh 2-week high this morning. The GBP/USD is off its lows but relatively subdued due to the ongoing Dollar demand.