The pound has continued to be downtrodden as the race to find a replacement PM to Theresa May continues. Sterling has remained directionless following PM May’s resignation and it will likely remain this way until a successor has been appointed. The leadership campaign is due to be finalised on the 22nd July, however some volatility can be expected as things progress. Adding to Sterling’s woes, data released this morning displayed a sharp slowdown to the economy. GDP data was due to hold flat at -0.1% however fell to -0.4%, while manufacturing fell from 0.9% to -3.9%.
The Week ahead:
Brexit politics will likely be the key driver for the pound over the coming weeks. With leadership campaigns getting under way today there could be some volatility. However, with the three front runners, Johnson, Gove & Hunt, having varied takes on Brexit it is still unclear which direction Brexit will progress in next. The key hard data this week will be the GDP data, mentioned above, and wage data released at 9.30 BST tomorrow. Average earnings are forecast to show a fall from 3.2% to 2.9%, however any improvement on this could strengthen the pound.
A quiet week for the Euro, the first currency news coming at 9.15 BST on Wednesday. President of the European Central Bank, Mario Draghi, will be speaking at the ECB conference in Frankfurt. Volatility is often expected during his talks as investors look for clues to future monetary policy. Eurogroup meetings will be taking place on Thursday and on Friday there will be a smattering of minor data releases.
For the dollar the key data releases will be inflation data and retail sales figures. As inflation data is linked to interest rates investors will be looking closely at this. Core CPI is forecast to release at 0.2% from 0.1% with any figure being released above forecast working in the dollars favour. On Friday, retail sales data will be announced. Forecast to show strong growth from -0.2% to 0.7% month on month.