What is next for the pound?
Despite a lack of strong recent UK data, the Pound has risen against most major currencies in the early trading session. The currency has found support from an optimistic forecast from the EY Item Club, predicting that the bank would still hike UK interest rates twice in 2018 and twice again in 2019. The forecast also predicted that UK growth would reach 1.6% in 2018 and 1.7% in 2019.
This forecast tends to deepen the perceived interest rate policy divergence between the BoE and the European Central Bank (ECB). As the recent Eurozone inflation figures have been modest leaving market participants feeling both Banks are on a separate path of hikes, or non-hikes.
Whether or not the Pound continues to regain last week’s losses depends on how strong this week’s UK data is. Friday’s UK GDP projections may prove pertinent. If the UK is projected to have seen stronger than expected growth in Q1, BoE interest rate hike bets could rise, and the Pound would strengthen.
Until then however, it could be the Euro that drives GBP/EUR movement most, with key Eurozone confidence stats due in the coming days and the ECB’s anticipated April policy decision to take place on Thursday. Any perceived stance shifts from the bank could have a major impact on the Euro.
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